Lord Marlesford: My Lords, I thank the Minister for that Answer. Many of us recognise that the passport office is doing a better job on ordinary delivery to those of us who need passports, but there are considerable worries about the security of the whole system. Does the Minister realise—this is from an Answer given by the noble Baroness, Lady Scotland—that, in 2006, in spite of having changed its delivery system, no fewer than 740 passports werelost in the post on dispatch from the passport office? Hundreds of thousands of people claim—some of them certainly spuriously—to have lost their passports. Does the Minister agree that a review with an independent chair is needed to make the passport system really watertight in these days of terrorism and serious crime?

Lord Bassam of Brighton: My Lords, of course itis a matter for concern. Some 240,000 of those passports were said to be lost. I do not believe that the great British public is becoming more forgetful, but we cannot forget that people do lose passports or have them stolen. We have to have a proper system for ensuring that we keep a careful track of that and we now have such a system in place.

Baroness Trumpington: My Lords, how are passports sent through the post? Is it by special delivery or is there some sign that they are passports going through the post? I ask that because my bank recently rang me and asked whether I had received a new cheque book. "No", I said. "Well, you won't" the bank said "because it has been stolen". I asked: "Has any cheque been drawn on it?" The bank answered: "Yes, for £4,000". The man who was stealing the cheque books was caught. I just wondered whether those 700 plus passports had met the same kind of fate.

Lord Rooker: My Lords, by 18 May this year, the Environment Agency had received notifications for waste management licensing exemptions from 71,704 farmers. At the beginning of 2007,329 officers were assessed as being capable of carrying out unsupervised inspections of agricultural waste exemptions, with more being trained to make integrated inspections, covering various environmental aspects, in one farm visit.

Lord Bassam of Brighton: My Lords, Ministers and officials meet regularly with BAA to discuss a wide range of issues, including proposals for development and the role of Heathrow as one of the world's busiest airports. BAA is responsible for the operation ofthe airport and is currently undertaking a programme of improvements at Heathrow, including the construction of Terminal 5 and Heathrow East, which aim to improve the customer experience.

Lord Bassam of Brighton: My Lords, that issue is not lost on the Government; it is one of the reasons why we are very keen to see Heathrow improved. The noble Baroness is right to highlight the issue. Millions of people come through Heathrow every year. I think it handles 67.7 million passengers annually, which makes it one of the most used—if not the most used—airports in the world.

Lord Rooker: My Lords, the more accurate barometers, which most if not all manufacturers make, are not mercury barometers. I looked at a catalogue from one of them this morning. Out of seven barometers in the photographs, only two were mercury. The aneroid parameters are more accurate. In fact, they are so accurate that when the Guardian published an article last week headlined,
	"Why British barometers are out in the cold",
	it illustrated it with a photograph of an aneroid barometer, not a mercury barometer.
	I do not think that this has been got wrong at all. Mercury is a highly toxic substance. The Fire Service responded to the consultation by saying that it agreed with taking out mercury barometers because of the risk of vaporisation of mercury. The average barometer is a health risk. The smallest mercury barometer would contaminate 4.5 million litres of water, enough to fill 40,000 Olympic sized swimming pools. That is how toxic and dangerous it is.

Lord McNally: rose to call attention to the United Kingdom's membership of the European Union and to the contribution which the European Union can make to the pursuit of United Kingdom national interests and to the management of global problems; and to move for Papers.
	My Lords, I am grateful to the noble Lord, Lord Rooker, for warming the House up and getting it into a European frame of mind for this debate. I called this debate in the anticipation that in a week's time, the European Union approaches not so much a crossroads as a positive spaghetti junction of decisions. Our speakers' list today reveals a great deal of road sense and collective wisdom about negotiating Europe's tricky corners. So it is with more than the usual pious hope that I ask that the copy of Hansard that will contain our debate goes into the weekend Box for the Prime Minister. I am sure that he will find some useful advice from the European negotiation equivalents of Lewis Hamilton due to speak between now and 4.30 pm.
	I do not belong to that now select group which came back from the Second World War with a "never again" commitment to building a better and more united Europe. But I am part of that post-war generation who endured what President Kennedy termed,
	"a hard and bitter peace".
	I have been a member of the European movement since my student days because the arguments for co-operation with our nearest neighbours seem to answer fully Dean Acheson's famous jibe that we had lost an empire and failed to find a role in the world.
	In the late 1960s, I had the honour of working with Jean Monnet, and I remember asking him what had been the driving force behind the schemes he had brought forward which had led to the creation of the Common Market. He told me, "I wanted to create something that would make it impossible for France and Germany ever to go to war with each other again".
	That ambition, a noble ambition given the history of the first half of the 20th century, has meant that the European project has always had a political as well as an economic agenda. The key arguments for Britain's membership have always been prosperity and peace. Looking back on 40 years of campaigning, I do not regret my youthful enthusiasm. Peace and prosperity have been delivered. Europe stands as an example to the world of how old enmities can be put aside and a new order established by consent on the basis of democracy, human rights and the rule of law.
	That our Union now consists of 27, soon to be 28, sovereign states, with others queuing to join us, is an example and a model which others are eager to follow. The political benefits are there for all to see. I know from direct personal experience in government inthe 1970s that it was the underpinning offered by membership of the European family that stabilised and strengthened the fragile democracies of Greece, Spain and Portugal as they emerged from right-wing dictatorship. Likewise, it has been the carrot of EU membership that has given strength to the reformers in former Soviet bloc countries to push through the reforms of governance and legal systems to underpin their fledgling democracies. So I do not speak today as an apologist for a Europe that has failed but for one that has succeeded beyond our wildest dreams.
	However, I am also aware of another reality. My children are aged 17, 13 and 11. The events that motivated the founding fathers and so influenced my Europeanism are now part of their history lessons, as remote to them as the Crimean War was to me. I cannot make the case for Europe to my children and their generation purely on the basis of the historic failures of the 20th century. The case has to be made anew on the basis of the challenges and opportunities facing those whose lives will stretch well into the 21st century. Making that case is urgent and necessary if we are not to be lured into a fatal wrong turn by old prejudices and out-of-date arguments.
	I will listen to two speeches today with extra care—I will, of course, listen to all of them. The first will come from the noble Lord, Lord Howell of Guildford, right at the end, but nevertheless most welcome. In recent months, he has tried to give an intellectual polish to his leader's attempts to bring his party's approach to Europe more in line with reality. As I said, in the past I have listened to him most carefully. However, too often, his analysis and solutions remind me of a cartoon of the early 1960s that showed a football team dressing room. In the dressing room were Adenauer, de Gaulle and the other leading European statesman of the day, all depicted putting on their football boots and football shirts. At the dressing room door, stood Sir Alec Douglas-Home, immaculate in his cricket whites and holding a cricket bat. The cartoon was entitled, "joining the game". The message is as clear today as it was then—it is no use turning up ready to play a game that the rest of Europe is not remotely interested in playing.
	The other speech that I will be examining with great interest is that of the noble Lord, Lord Triesman. In particular, I will be looking to see how much his remarks chime with those of Mr Ed Balls who recently published a Centre for European Reform pamphlet in which he called for a hard-headed pro-Europeanism. He explained it thus:
	"Pro-European, because we recognise that we are stronger by co-operating with our partners. Hardheaded because we have the confidence to put our national interest first, to say "no" sometimes and to argue our case where we believe Europe risks taking the wrong course.
	That surely offers the basis for a broad consensus of approach, especially if it were to be matched by Ministers ceasing to treat every European decision in terms of victories for which credit is taken or defeats for which Brussels is blamed.
	The first test of hard-headed pro-Europeanism comes next week. As the Guardian pointed out last Monday, the Euro-sceptic British press is already cranking up discussions on treaty amendments to demand a referendum, whatever is agreed. It will take political courage in all parties to resist that clamour; but if what emerges from the discussions at the summit looks and feels different from the Constitutional Treaty, if it is no more than a prudent adjustment of the rules in recognition of enlargement and to make the EU more efficient and more effective, we should say so and deal with the measures accordingly. Though the negotiations will be Mr Blair's last hurrah, the political test will be Mr Brown's. Again as the Guardian put it in Monday's editorial:
	"The incoming Prime Minister has to decide. Does he want to bash Europe? Or does he now want to help build it? It is a big strategic moment. Mr Brown should embrace the strategic option in spite of the political difficulties".
	If he does, I believe that addressing the real European agenda becomes easier, but no less daunting.
	As the G8 demonstrated, Europe's response to climate change will be pivotal in obtaining constructive responses from the USA and the super-economies of Brazil, India and China. There is still a chance to rescue the Doha round of talks, but it has to retain its development objectives—and again there is a need for Europe to move. The Lisbon agenda seems badly stalled, yet its target of becoming,
	"the most dynamic and competitive knowledge-based economy in the world",
	is still the only realistic strategy for Europe. There is a need for Britain to play a full part in supporting the German initiative for a better Euro-American dialogue, as well as supporting Portugal's ambition for its presidency of a Euro-African summit. Relations with Russia also need to be put back firmly on the European agenda.
	On issues nearer home, I know that some participants will have received the impressive briefing from the Corporation of London. The success of our financial services industries in Europe has been truly amazing. I will not delay the debate by quoting figures but I refer those interested to The Importance of Wholesale Financial Services to the EU—a piece of research recently published by the Corporation of London. Let me just quote one paragraph from that brief:
	"For the EU to take advantage of the full growth potential for wholesale financial services, European policymakers should be encouraged to introduce measures to maintain and strengthen the process of integration in the financial service industry, enabling Europe's financial clusters to contribute further to the wealth and international competitiveness of the Union and so to the fulfilment of the Lisbon agenda".
	That is the message from Britain's most successful sector—the goose that is laying the golden eggs. No wonder Mr Ed Balls, with his City experience, says:
	"This old ideological debate about Britain in Europe seems increasingly out of place and time".
	He sees, as the City sees, that there is practical work to be done on matters of urgent importance to Britain. Indeed at some stage Mr Balls and his Prime Minister will have to apply the test of hard-headed pro-Europeanism to Britain's membership of the euro.
	Noble Lords will by now have gathered that the thrust of my argument today is that whateverthe topic, whether it be the fight against terrorism, the war on drugs and people trafficking, the protection of our environment or our capacity to influence events in Africa or the Middle East, or any of the other issues that I have touched on, Britain has a better chance of defending its own interests and influencing world events from within a successful European Union. Of course, the road ahead is not without its hazards, but none of the threats we face is greater than those faced by the "Never Again" generation. Of course, the shape and scope of 21st century Europe will not match exactly the Monnet blueprint. He knew that. In old age, he wrote the following:
	"It is impossible to foresee today the decisions that could be taken in a new context tomorrow. The essential thing is to hold fast to the few fixed principles that have guided us since the beginning: gradually to create among Europeans the broadest common interest, served by common democratic institutions, to which the necessary sovereignty has been delegated".
	So it will be our Europe, my children's Europe, not Monnet's, that we are building. That is not to ignore what has been achieved so far nor fail to take pride in those achievements. I genuinely look forward to listening to all the contributions because I am confident that in the next five hours Ministers will receive some very useful navigational advice as they approach Europe's Spaghetti Junction. I beg to move for Papers.

Lord Clinton-Davis: My Lords, the noble Lord, Lord McNally, has done this House an immense service by raising, and speaking so effectively on, this issue. Too often Europe is unfairly disparaged. Sometimes it makes mistakes, but we all do. Being a European Commissioner was undoubtedly a highly salient feature of my life. I had the good fortune to serve in an excellent Commission, headed by Jacques Delors, who in my view was one of the best presidents of the European Union.
	It is a great pity that the then Prime Minister did so much to distance herself from the work of the Commission. I do not think that she carried all her Ministers with her in that destructive effort. Nevertheless, if Britain had been more positive, the whole history of Europe and of our country could have been much better and very different.
	The European Union and the legal texts on which it is based have much changed, particularly in recent times. There are now 27 members, whereas there were only 12 in my day. We witnessed the end of the Cold War. We have seen Europe look increasingly outward and actively involve itself in the process of globalisation. The prosperity of all its members has undoubtedly increased and with it democracy has thrived. This has meant that human rights have been more widely respected and, with that, the internal market has developed. The EU's ability to participate ever more effectively in the global debate on climate change and generally speak more authoritatively in international fora has followed.
	We have perceived, particularly in recent times, a disparity between these radical changes and, I believe, a waning public support in some instances for the European Union. Some have been malicious about that but there is undoubtedly real concern as well. This is based on a misunderstanding and a failure on the part of those charged to explain the great advantages which the European Union has bestowed. Perhaps we should begin to listen more than we do. How effectively have the rigours of examining the credentials of the new members and the benefits that will accrue to all of us been explained to the public?
	There can be little doubt that enlargement has been a dramatic benefit for the European Union, particularly for this country. As the Government have pointed out, trade from the United Kingdom in merchandises has increased with the new member states by some 392 per cent from 1992 to 2005—nearly 10 times as fast as with the rest of the world. That is an achievement that we should trumpet. It has been of immense benefit to us, and we do not say enough about it. Investment in new and candidate states has also radically increased, especially from the United Kingdom.
	A similar picture can be painted for employment growth. There has been a dramatic increase in output and jobs in the United Kingdom, which has played a vital role. That has been done in no small measure due to the expansion of the single market. I am very sorry that the late Lord Cockfield is not here, because he did so much in that first Delors Commission to advance the case of the single market.
	Fighting international crime of all sorts has been an important by-product of the international co-operation of which I have spoken, as has been the protection of the environment, which was one of the jobs that I had at the Commission from 1985 to 1989. The European Commission faces huge challenges, as the noble Lord, Lord McNally, said. The Lords European Union Committee has, very properly, come to the conclusion that those challenges cannot be met unless it is provided with institutional change and enlarged decision-making procedures. The Government say that they cannot achieve that on their own. Both views are right. But it is for the House of Lords to recommend how it considers that policy can be enacted more effectively and efficiently, while it is for the Government to face situations as they are.
	The European Union has to deal with the vexed question of the admission of Croatia and Turkey. The Union would be immeasurably strengthened if both could become members, but in neither case will admission be easy. Croatia will unquestionably benefit from the Central European Free Trade Agreement, like all western Balkan countries. Already substantial progress has been achieved, and I welcome the expression of support for Croatia's accession on the part of the Government. Some institutional adjustments might have to be made. We should certainly not stand in the way.
	I am happy that the Government support Turkey's accession as soon as possible. I am delighted that the death penalty has disappeared and the rights of women and minority groups have improved, but the Government are right to stress that a great deal more needs to be done, not least in doing what Turkey can to make real progress over Cyprus.
	I am delighted that some of my colleagues who followed me in the Commission are speaking in this debate, particularly the noble Lord, Lord Brittan, who I had the great pleasure of meeting on several occasions before he took office. He is not the only one. We owe an enormous debt to the noble Lord, Lord Williamson. He was a great ambassador for this country in the job he fulfilled. The progress which the European Union was able to make was undoubtedly due to him—as well as Jacques Delors—and I pay tribute to the noble Lord today.

Lord Howe of Aberavon: My Lords, I thank the noble Lord, Lord McNally, for initiating this debate, while refraining from claiming that I am at least as antique as he is in my support for the European cause. I join the noble Lord, Lord Clinton-Davis, in his tribute to the noble Lord, Lord Williamson, and the late Lord Cockfield. It is common knowledge that my noble friend Lady Thatcher and I do not always see eye to eye on European matters, but it is fair thatthe noble Lord, Lord Clinton-Davis, should join me in paying tribute to her, because it was she who appointed Lord Cockfield to the Commission, specifically to advance the cause of the single market. It was Lord Cockfield, in partnership with Jacques Delors—I almost said Lord Delors—who achieved that objective, which was of huge importance. There is more that unites us than divides us; which brings me to my first point.
	The most important point of this debate is that, however difficult it may sometimes be to perceive, there is, in fact, unanimity between the leaders of all three parties represented in this House on the continuing importance of active and effective United Kingdom membership of the European Union. The shadow Foreign Secretary, William Hague, in one of his many speeches on this subject said:
	"I am a firm believer that Britain's place is in the European Union, a strong player in Europe, not at the margins".
	That was echoed in a more direct way, remarkably, by my noble friend Lord Howell last Friday in this House. He said that,
	"we in this party do not favour a withdrawal strategy at all. We see that as defeatist".—[Official Report, 8/6/07; col. 1446.]
	He was making that point against the background of a querulous chorus led, as always, by the noble Lord, Lord Pearson of Rannoch, who faithfully reproduces a similar chorus, always behind me, to that heard during the passage of the European Communities Bill in 1971 and 1972. Some decades on, we appear to be slightly ahead of him in the debate.
	Against that background, it is important to note that next week's meeting of the European Council comes at a propitious moment, because for many years in the first decade of this century the Union has been overshadowed by some rather dismal clouds—first, by the overly ambitious Lisbon strategy for economic reform, which quickly stumbled, and the failure of the Barroso Commission in its early years; secondly, by the Iraq conflict, which divided the member states and poisoned the political atmosphere; and thirdly, by the constitutional treaty that confronts us.
	Happily, enlargement preceded that, and now there is some cause for cautious optimism and the clouds are beginning to recede because, first, José Manuel Barroso has regained confidence in his strategy for economic reform. It is looking more credible, which has been represented by the achievement, for example, of the services directive ratified by the European Parliament. That success was achieved by a proper partnership between Conservative Members of the European Parliament and their colleagues in the European People's Party and the European Democratic Party.
	Secondly, there has been a formidable change in the political landscape. A Europe in which Merkel, Sarkozy and Brown are the key leaders will be much less scarred by the memory of the Iraq conflict than one led by Schroeder, Chirac and Blair. It would be better still if Brown's place were taken by Cameron, but I shall settle with what we have for the moment.
	The third cloud, which is at the heart of what I want to say today, is the constitutional malaise. I remember, with some difficulty, an article that I wrote in 1996 in a booklet published by the Philip Morris Institute entitled Does Europe Need a Constitution?. I said in my essay that I was not opposed to a document consolidating the existing treaties in a shorter and more comprehensive text, bringing the European process closer to the people. With respect to the noble Lord, Lord Kerr—I might call him my noble friend—and his master, President Giscard, I am afraid that they did not quite achieve that objective. In 1996, I was certainly opposed to the idea of a constitution. En passant, I am equally opposed to the absurd idea of trying to produce a written constitution for this country. We have done badly enough in writing constitutions for Wales and Scotland. In my essay, however, I had a clear warning as follows:
	"If a constitution is designed to sanction a further accretion of power at the centre, the project is doomed to fail".
	I take no pleasure in saying, "I told you so". But now let us look at where we go from here.
	Under the new leadership, which I mentioned, it is clearly recognised that the constitution as it emerged in its original state, or anything like it, must be set to one side. But the scales need to fall from our eyes as well as from the eyes of those who had affection for that constitution. We have to recognise—as do the French and the Dutch, who are grappling with this problem—that the document has in fact been ratified by 18 of the 27 member states. There must be a limit on how far we can expect other member states to resile from that which they may not have expected but which they certainly endorsed.
	What needs to emerge now is an amending treaty that is more similar to the preceding ones, whether Maastricht, Luxembourg, Nice or anywhere else, but is without, for example, the embarrassing charter of human rights. I remember that at the time of the Single European Act there was a comparable document often being promoted called the Genscher-Colombo Act. Happily, at Stuttgart in 1983 we were able to sideline Genscher-Colombo, despite one's respect for both those eminent gentlemen, and it did not get attached by mistake to the Luxembourg treaty.
	We need also to see that the document that emerges is shorn of flags and symbols of that kind. But we must have a document that includes the changes necessary to accommodate enlargement, such as a reduction in the number of Commissioners and a full-time president of the Council in place of the rotating creatures who currently do the job. We need a simpler set of rules for voting. I will not weary colleagues by trying to analyse the current rules because, with my distance from the agenda, I no longer understand them, but the double-majority approach is broadly right. Above all, we need a merger of the jobs currently done by the Commissioner for External Affairs and the Council's high representative for foreign policy—so well done, incidentally, by Javier Solana, as he has performed so far. But, please, let us not have another Foreign Minister. We have enough Foreign Ministers already, and to have a super-creature of that kind is otiose.
	If the United Kingdom wishes to be, as William Hague said, at the end of all this,
	"a strong player in Europe, not at the margins",
	then compromise will be essential to achieve the final result. That would be as true for a Conservative Government, as it has been in the past, as it will be now for a Labour Government. If it is to be considered by a Conservative Opposition who intend to be in government, then they need to recognise that the case for compromise is just as strong. I believe that a partnership between Barroso, Sarkozy, Merkel and Cameron would be an improvement on the one that is there, but in the mean time I hope that they will be able to achieve the kind of compromise that I have been talking about.
	One more lesson is very important, as important for my right honourable friend David Cameron as for Gordon Brown—indeed more so. In this context, nothing could be more imprudent for any party than to allow itself to be bound by the outcome of a referendum on this issue. Referenda are dangerous weapons; they explode in the face of those who designed them. I have only ever approved of one set of referenda. It concerned a resolution that I proposed and which was passed at an annual meeting of the Welsh Conservative Party in 1962. I proposed that pubs in Wales should be open on Sundays and that the decision should be made by referenda held on a county basis every seven years. Thirty-five years later, my right honourable friend Michael Howard was able to repeal the legislation because even Gwynedd was free. That was a simple issue presented to an intelligent people, but it is not how referenda should be viewed on the scale of a European issue.
	It is important for Britain to be among the leaders of a purposeful European Union, working for effective partnership on the issues already identified by noble Lords: a vibrant single market, a reliable energy supply, effective policy for climate change and, in a world where Russia, Iran, Israel and Palestine and sometimes even the United States are less and less predictable participants, an effective common foreign and security policy of the kind called for by my noble friend Lady Thatcher in a document circulated back in 1983. That will be the need for this country and for Europe during the Brown years, the Cameron years, the years in between and, if we decide which years are to belong to whom, in the election that will take place during those years.
	Nothing could be worse for all those years and all the procedures than for all the processes to be dominated by the threat—still less the reality—of a referendum on these crucial issues. The populist tail must not be allowed to wag the policy dog. As I have often said, democracy must be led and not fed. We are entitled to look for leadership in getting the right answer to these issues rather than an attempt to feed the population, which does not deserve to be fed such rotten fodder.

Lord Williamson of Horton: My Lords, as this is a European Union debate, I declare that I spent a part of my career in United Kingdom public service dealing with the European Union and another part of it in the European Commission. If that is a declaration of interest, I still have it and I make that declaration now.
	I congratulate the noble Lord, Lord McNally, on initiating this debate and especially on drawing it so widely, with particular reference to the contribution that the Union can make to the pursuit of United Kingdom national interests. I want to draw attention to one or two specific points under that heading, as well as dealing with some of the constitutional and related issues which are already being discussed and are imminent.
	The European Community, now the European Union, has been at the centre of European political and economic life for many years. It is 50 years since the Treaty of Rome, and we have been part of it for almost half a lifetime. Over this very long period, I have been struck by the frequency with which not only debate but also public perception of our role within the Union has been dominated by reaction—often knee-jerk—to developments or proposals which are often minor and which may be—or, more likely, are alleged to be—against our interests. Of course, if there are proposals or developments which are indeed against our national interest, we should strongly resist them, demolish them or adapt them to our advantage. But often here in Britain the noise drowns out the reality. That is a sad part of our history and we should do our best to change it.
	In addition, having served as both a United Kingdom and a European Commission official, and having attended literally hundreds of meetings of the member states in the Council and hundreds of meetings of the European Commission itself, I am surprised by how often people in Britain believe that major European Union law is always made by bureaucrats when, in fact, it is made for the greater part by the Ministers of the member states in the Council in consultation with—or, more recently, in co-decision with—the representatives of the people in the European Parliament. I think that that misunderstanding influences public perception of some of the decisions that are taken.
	It would be difficult to make a speech today without making some reference to the imminent European summit meeting and to the memorial service now being held for the constitutional treaty. But mymain theme today is to stress that sharing, as we do, and potentially benefiting from a Union of almost500 million people, with many common interests and ambitions, a generally high level of economic prosperity and a great range of talents in business, the arts and sciences, the right course for Britain is to give our attention in particular to identifying those areas of activity, those potential proposals and those areas of co-operation that will give us—the British—the greatest benefit. That is where our priorities should lie.
	I am sure that the Minister will say that the Government are doing this, whether in the Lisbon agenda or elsewhere. Well done on that, but my theme is that the identification and achievement of benefits for Britain and generally, in consequence, for the EU as a whole, should be the dominant theme of our approach, not just for government but for trade and many other organisations. How can we make best use of the huge strength and diversity of the Union? That is far more important than the occasional political disagreement. Let us hear in which areas we believe the best potential lies. That should be the European agenda. By agenda, I do not mean that we should be looking necessarily for formal proposals for legislation—probably not, as legislation is slow and very often unnecessary—but at other forms of co-operation with European partners at the national, local or other levels.
	I want to take one specific example in saying a word about research and development. So often we hear about other great political issues that are important—I accept that—but we do not hear quite so much about what happens at a lower level, which perhaps in terms of the long-term prosperity of the country may be very important. The research and development programme of the European Union is very large. The seventh framework programme for 2007-13 has a budget of €53 billion, which is a 63 per cent increase over the programme that preceded it. The United Kingdom has favoured this, and over the years we have benefited clearly from the EU programmes. When I was in Brussels I was always very much impressed by the seriousness with which the construction of the programmes was discussed and examined—in particular, the balance between basic research and development work being closer to the manufacture and marketing of products.
	I think that the approach is very good. It is an example of a benefit that we achieve now and from which we could probably achieve more, as the approach is similar in many ways to our British approach elsewhere. The programmes are bottom-up; they are based on a wide process of consultation; they are subject to open competition with peer review and decisions on the programmes; and the cost is shared—perhaps we might think a bit more of doing the same thing in the common agricultural policy. The cost is shared with equivalent sums from industry or government, so that the total investment in research and development is much bigger than the basic EU programme.
	This is an example of the considerable flexibility that we in the EU have shown over the years.We started with programmes that were more aptperhaps in the 1980s; for example, on advanced telecommunications, basic research in industrial technology and biotechnology. Gradually over time, we have moved into other areas, such as the life sciences and the environment, while the latest programme has a substantial effort on health and transport as well as environment. The programme is flexible and can give real benefits. I wanted to cite it today because I so often read in the newspapers about the things that are apparently going wrong; I seldom read about the things that are apparently going right. I take the opportunity of being on my feet to draw attention to this one.
	In simple budget terms, which is not the most important point about a research and develop programme, the UK received more funds under the fifth programme than it paid in. That was also true of the sixth programme in relation to manufacturing. We are in fact benefiting pretty well. We must give great attention to the budget. I always accept that, and always look at the latest figures. From the ones I have seen, we are unfortunately the fifth largest net contributor per capita, an important way of looking at the contribution; I wish we were lower.
	I will say a word on what we are going to do in the immediate future at the European summit meeting. Views on the proposed constitutional treaty are very strong, but this does and should not inhibit us from now taking an objective look at matters which might improve the working of the Union while protecting our national interests. The constitutional treaty has unfortunately shared the fate of John Cleese's Norwegian Blue parrot, but any new proposals should not hark back to it but be looked at on their merits; that is where we should be now.
	There is still room for some better ways in which the Union could be governed; for example, the extent to which national Parliaments should be able to sound a warning when subsidiarity is not being respected: the famous "yellow card". That would be a good thing to bring in, among others Some elements of the operation of the common foreign and security policy could be improved, for example, by removing the six-monthly rotating presidency and having one of longer duration, as well as having the high representative acting as chair of the CFSP council and as vice-president of the Commission—although not, of course, with the title "Foreign Minister". I agree with the noble and learned Lord, Lord Howe; it belonged to him at one time, and should not be used by anybody else in the European Union. We should retain for the Charter of Fundamental Rights the position negotiated at Nice, that it should not be a formal part of the treaty. The more tricky questions—for example, on voting weights—could be looked at again. There is at least a good chance that that would be more favourable to us than what we have at the moment.
	Of course, Parliament would have to agree any consequential amendments of the treaties or they would not come into effect. Like others, I sincerely hope that any suggestion that these sorts of changes deserve a referendum will be put aside.

Lord Harrison: My Lords, I feel like a queasy quasar among the galaxy of stars who have already spoken in this debate and are to follow me. I, too, congratulate the noble Lord, Lord McNally, on initiating this debate and leading the Liberal Democrats, who have been the outriders for the pro-European cause in this country for many years.
	I will also pass comment on the 10 years of Tony Blair as our Prime Minister with respect to the European Union. I know that our colleagues on the further Benches have had criticisms from time to time, but there has been an enormous change in our attitudes to the European Union in those 10 years. When the Prime Minister came to power in 1997, we had few friends. We had the beef dispute and the stand-off. All that has now changed. There have been some real achievements in the between times, most notably enlargement. If I have a regret, I suppose it is our failure to join the euro. I remind the Euro-sceptics who will perhaps read this debate that all that they said about the euro and the single currency has not come to pass. Indeed, the euro seems to strengthen as each day passes.
	It is clear that the difficulty that the Labour Government have had from time to time has been the press's antagonistic attitude to explaining the European Union. Indeed, the press's short attention span seldom prevented it being attention seeking; I sometimes say "attention spinning". I will give your Lordships some examples of how that atmosphere has lightened. Some 10 years ago, in Cheshire, I was invited by the chief fire officer to preside over a conference on European fire safety, and we received guests from all around the European Union. Last year, we repeated that conference here in the Houses of Parliament, and we were able to share best practice. However, times have moved on and new opportunities and threats have arisen, most notably climate change and the effect it will have on the European Union and the call it will make on the fire and emergency services. I was so pleased that we were able to gather some of the top minds in the European Union as it was an example of what it does best.
	Another matter is enlargement. I hope that the Minister will look kindly on some of our new colleagues who are now fully participating in the enterprise and building solidarity by being part of27 countries in a strong European Union. I reminded him the other day in the corridor of Wroclaw, whose ambition is to be the city of tourism and hospitality in the future. I hope that the United Kingdom can show solidarity in supporting its worthy cause.
	We do not have many Euro-sceptics present today, but if they were here, they would doubtless be calling for withdrawal. We need to challenge those arguments. What would happen on the first day after we withdrew from the European Union? We would immediately start negotiating thousands of bilateral treaties to try to get back into mainland Europe and to help our businessmen, bus drivers and buskers take part in it. An example of Euro-sceptic thinking is found in the document paradoxically called Open Europe, but it seems to me that it wants to close Europe down. Those noble Lords who have examined the inside covers of the document will have noticed that they are printed upside down, which gives an indication of the way its writers look at the world, which is not acceptable to us. The document quotes my former colleague, Hans-Gert Pöttering, the president of the European Parliament and describes his words on QMV as "admirably frank". I hope the Minister will turn his attention to that subject. Hans-Gert makes the point that unless we have more QMV voting, we will not make progress, in particular in the single market. The United Kingdom has always had great interest in developing the single market, and sometimes our businesses and consumers have been frustrated by the occasionally slow pace of its development. It is to our advantage to increase QMV, especially in those areas. I know that the question coming up shortly has more to do with JHA matters, but I nevertheless encourage the Minister to respond to that.
	Many of use have received a brief about financial services from the City of London. What a barometric change, mercurial or otherwise, we see in it. I remember that a decade ago it was largely sceptical. It now says:
	"As the significance of European legislation in this area has grown in recent years, there has been far greater coordination of thinking about the future direction of the single market for financial services, combined with an acceptance of the need to pool resources. The City Corporation has for some time been involved in facilitating contact between the City and the EU institutions, primarily the European Parliament and European Commission".
	It would not do that unless it saw a change. It reports to us that the London wholesale financial sector has contributed through the European Union to world economic activity something like €644 billion. It is clearly a dynamic financial sector that will improve and widen its scope even more if we are able to release it within the single market of financial services. It makes the crucial point that an effective financial market within the European Union aids and abets the business community and what we seek in terms of competitiveness.
	The noble and learned Lord, Lord Howe, and my noble friend Lord Clinton-Davis mentioned Lord Cockfield. The development and completion of the single market—a single market which always changes; as a dynamic being, it has to—is our single most important task. From time to time we talk about trying to convince the citizens of this country and the European Union beyond about this. If we fasten ourselves to the task of completing the market, even as it moves away from us, that will bring the riches, the prosperity and the opportunities which our voters would embrace. They could then see why the European Union is good and useful to them.
	In my closing minutes I ask my noble friend to turn his attention to some of the problems that come with the possible restitution of the constitution, or mini constitution that may come about. As a member of the British-Netherlands All-Party Parliamentary Group I ask him what is his attitude to our Dutch colleagues. They are crucial to us. They share many of the UK's values, are near neighbours and share historical ties. Indeed, this year we celebrate the400 years since we were invaded by the Dutch fleet up the Thames.
	The Netherlands is a founder member of the European Union and a smaller country, which is significant. It was one of the two countries which said "no". Although Euro-sceptics tried to portray it as saying no to the European Union, I do not think that was so. There was unpopular government at the time, social spending was being cut and there was resentment at what was perceived as the larger countries, France and Germany, getting away with infracting the stability pact. There were perceived price rises as two guilders were more or less equivalent to one euro, some price descriptions were unhelpful, and there was concern about enlargement.
	On that last concern, will my noble friend react to the Dutch proposal to include the Copenhagen criteria within the re-formed constitution? Are we keen to encourage that? The Netherlands would also like to strengthen the yellow card system for national Parliaments being able to alert national Parliaments to any problems they foresee on the horizon regarding national interest. Are we sympathetic to that? The question has already been raised about the charter of human rights. What will be the nature of any protocol, if it is so written? Will it be legally binding or will it be aspirational and advisory in nature? I commend the Minister to think about our Dutch colleagues, who have been so close to us over so many years.
	I have one final point. I hope that resistance will be maintained to the inclusion of any reference to the Christian religion in the proposed changes. That is not required and would be unacceptable. We move into the period of a new Prime Minister in a few weeks' time in terms of Prime Minister Brown. All I can say is that the predictable is always unpredictable. The future Prime Minister is sometimes is cast as a Euro-sceptic; perhaps he will surprise us all. I hope so.

Lord Tugendhat: My Lords, I, too, very much congratulate the noble Lord, Lord McNally, on introducing the debate and on giving us this very timely opportunity to discuss the issues confronting the European Union. I agree, too, with the noble Lord, Lord Clinton-Davis, who followed me into the Commission, in what he said about enlargement. One of the tragedies of recent years is that this enormous success by the European Union has not been bruited about and not been claimed as a success, and, indeed, has been seen in some respects as a cause of problems. In fact, the spread of human rights, democracy and open markets to countries which were not only under communist rule for many years but some of which never enjoyed these benefits even before that is one of the great historic achievements of the European Union and something that in the long course of history will be regarded as of major significance.
	To turn to more immediate matters, I should like to address my brief remarks mainly to the Government but partly too to my own party. As far as concerns the Government, I am delighted that Mr Brown will be at the pre-meeting with President Sarkozy of France. It is, after all, Mr Brown who will be responsible for implementing whatever is agreed at the European Council, and it is absolutely essential that he should be involved in everything that goes into the make-up of the British negotiating position and indeed everything that goes into the negotiation.
	I have always understood that the Chancellor of the Exchequer is very close to Mr Ed Balls, and I noted that the noble Lord, Lord McNally, referred to the excellent pamphlet that Mr Balls published for the Centre for European Reform. I hope very much that the Chancellor will particularly bear in mind two sentences on the final page of the document. The first is:
	"Defending our wider national interest means being at the table and winning the arguments. We will not succeed by withdrawing to the extreme and anti-European fringe".
	Those are very wise words. The second sentence which I hope the Chancellor will bear in mind reads as follows:
	"So we should reject ideological approaches to Europe in favour of a pragmatic and hard-headed approach that reflects the reality of Britain, Europe and the world in the 21st century: a successful Britain, strengthened by its membership of the EU, and an outward looking globally focused EU, strengthened by the UK's active engagement".
	If the Chancellor takes these as his guiding lights, it will be extremely helpful.
	I hope too that other countries will take the same approach. We are here mainly concerned with issues that face the United Kingdom. But perhaps some of the most intractable problems at the European Council will lie not in the areas of most interest to us, but in areas that are of more interest to Poland and some other countries. Therefore, I urge the British Government to do all that they can to help Chancellor Merkel resolve these issues and not simply stand on the sidelines hoping for a smash that will divert attention from some of our difficulties. A constructive approach by the British Government, not only on matters that concern us but on those that concern others, is highly desirable.
	I agree with those who say that for Mr Brown the stakes are very high. His priority at the outset of his premiership must be to build good relations with Chancellor Merkel and President Sarkozy. It is that which I hope will colour his approach to all the issues that come before the Council. It is absolutely critical, if the European Union and Britain in particular are to work effectively on issues ranging, as the noble and learned Lord, Lord Howe of Aberavon, said, from climate change to Iran, to Israel and Palestine and to China, and how best to influence the United States, as well as on internal matters, that the three leading powers of Europe and the leaders of those three powers should be working closely together in a spirit of trust and harmony. In saying that, I do not mean in any way to diminish the importance of the smaller countries. The European Union is a community, the word by which it was known for a very long time. I certainly do not advocate any form of directorate, but the reality is that if Britain, France and Germany can work together and can provide a lead, the European Union is likely to work much more effectively than if they cannot. This is therefore, I hope, the beginning of a new era with new leaders who will enable that to happen.
	The Government's aims so far as the mini-treaty, or whatever it is to be called, is concerned are clear. Under governments of both parties, we have always in this country said that we want less bureaucracy and better decision-making. Here we have an opportunity to achieve that. The noble and learned Lord,Lord Howe, and the noble Lord, Lord Williamson, enumerated a number of the issues. I agree with them that we want a permanent chair of the European Union; we want to get rid of the rotating presidency; we want a revision of the voting weights, which, incidentally, also would be beneficial to this country; we want a reduction in the size of the Commission; and we want the merging of the high representative on the one hand and the Commissioner for External Affairs on the other. These are all attainable. It must be the objective of the British Government to secure those changes. If we can secure those changes, that will justify a considerable celebration on the partof Mr Blair for his final European Council and Mr Brown as the man who will have to implement them.
	I hope, too, that we will seek agreement with our partners on issues in which we have more difficulty, such as justice and home affairs on the one hand and the Charter of Fundamental Rights on the other. But there are clear British interests involved in these matters. There are genuine differences of view between the approach to these issues in this country and in some other countries. If, therefore, it is not possible to reach an agreement to which we can sign up on these issues, we should not stand in the way of others but should seek to ensure that we are not bound by those decisions. There are precedents for that. It is always better if one can have everyone doing the same thing, but there is no point in having everyone doing the same thing if the same thing is contrary to the interests of the country that one is representing. Therefore, rather than stand in the way of others, we should let them go ahead and ensure that we stand outside.
	Finally, I turn to the position of my party. I do not share the deep antipathy of some noble Lords to referenda. Referenda have an important part to play in modern, British constitutional practice, but they should be invoked only when very important and serious matters are at issue. If there is a significant transfer of power from this country to the European Union, I am not opposed in principle to the idea of a referendum. But it is very important to be clear about what significant transfers of power imply. Certainly, technical adjustments of the sort that we have discussed, an amending treaty of the sort that is likely to be agreed, should not be put in that category. One must draw a clear distinction between what is important and what is merely an adjustment. If the judgment is made on objective grounds, the Conservative Party will be well able to stick together. But if the judgment is made that any change, for whatever reason, however desirable or however much in Britain's interests, should be regarded as grounds for a referendum, I am afraid that there will be those in the Conservative Party who would be unable to go along with that. Those differences would apply not only in relation to calling a referendum, but also when the referendum campaign takes place. I hope very much that objectivity and good sense will apply in the Conservative Party, as well as on the side of the Government.

Baroness Williams of Crosby: My Lords, in listening to this debate, which I congratulate my noble friend Lord McNally on having introduced, I have been very struck by the extraordinary potential that exists in the British Parliament to make a much greater contribution to the development of Europe than we have made so far. When one reflects, for example, on the quiet genius of Lord Cockfield, who was probably the person who singly took the greatest share of responsibility for the introduction of the single European Act and the single market, with all that flowed from that—such as, incidentally, a greater extension of qualified majority voting than in any other treaty since the passage of the Rome treaty—one sees part of that potential. Listening to our former commissioners, such as the noble Lords, Lord Clinton-Davis and Lord Tugendhat, and others, and on listening to the noble and learned Lord, Lord Howe, and others who took part in the building of the European Community, one hears again that immense potential.
	I have to ask myself why this tremendous resource has had so little effect recently on the development of Europe. There are two reasons for that. First, at a time when the introduction of the new Government in 1997 was applauded and cheered throughout Europe, some people may remember that marvellous picture of the young Prime Minister, Mr Blair, at the Amsterdam summit, bicycling into Europe as the new young leader, from whom so much was hoped and expected. One can see how far short the promise of that moment has fallen by the actuality of where we now are.
	I do not want to suggest that the Prime Minister has not played a considerable part in the development of Europe, because he has, or that the noble Lord, Lord Harrison, was wrong in pointing to some of those achievements. Nevertheless, too many of the Prime Minister's ringing speeches have been made not in Britain but outside this country. Too often the Prime Minister and those around him have fallen back in the face of fear of what the press barons can do in this country. In my view, some of our press barons have a very great deal to answer for in having fostered and helped an almost totally prejudicial and distorted picture of our relation to Europe and what Europe has meant for us.
	I have always believed that the Government have a duty to bring about a broad campaign of information about what was happening in Europe and to challenge some of the ludicrous assertions made by a small group of intense Euro-sceptics who have done immense damage to the interests of Britain. I think that one still has to say that we have fallen badly short in these respects. As the noble Lords, Lord Clinton-Davis and Lord Williamson, so ringingly said—and I join in the applause for the major contribution to Europe made by the noble Lord, Lord Williamson—there has been an astonishing achievement by the European Union: namely, the introduction of the Copenhagen criteria, which lay down requirements of human rights, democracy and the rule of law. Those requirements have all been met by the countries which have recently joined in the expansion into central and eastern Europe and, as the noble Lord, Lord Tugendhat, and others have pointed out, have affected the way in which Turkey and other potential candidate countries have dealt with their own difficult issues. It is an astonishing achievement. Looking back from 1997 to the present time, it is an achievement which so far out-stretches what has happened in the attempt by a higher power to establish democracy and the rule of law in Iraq and Afghanistan that one is simply amazed that we have not picked up a trumpet and declared the scale of what has happened and what has been done.
	Let me turn to where we now are. The two great challenges that face us are the huge issue of climate change and the question of the constitution, which will be addressed by my noble friends Lord Maclennan and Lady Miller. On climate change, about which my noble friend will speak, let us make no pretence: anything less than the united power of the European Union will have no impact to speak of on the way in which we develop how we are to cope with this challenge and threat. It is the European Union, with its weight in the World Trade Organisation, in discussions at the United Nations and elsewhere, which is likely to have an effect. Britain on her own would be at best a small-scale contributor from outside.
	Even if we take the issues of terrorism, organised crime and people trafficking, which deface our world at the present time, I have to question whether the tentative approach as regards opting out that characterises the British position on Schengen and the JHA programme is really the most effective way to deal with these huge threats. We are not matching up to the scale of what confronts us and soon we must have a serious and rational argument about where we stand on these issues and on the continuing opting out that follows from Schengen.
	Let me say a few words about the so-called constitution. I agree strongly that we do not need a new constitution but that we need an amending treaty. Noble Lords have already spoken about this and I believe that I share almost wholly the approach of the noble Lord, Lord Williamson of Horton. The changes that need to be made are relatively moderate and will enable us to decide within a Union of27 what needs to be decided.
	A marked element here is the disappointment many of us feel about the inadequate response of the European Union to some of the most difficult problems of foreign policy and defence in our world. I shall take as just one example that of the relatively low profile and in many ways very disappointing contribution made by the European Union as one of the members of the so-called Middle East quartet. It has to take responsibility in part for the terrible anarchy we now see spreading throughout the Middle East, not least in the recent horrific stories from Gaza and the West Bank. The European Union has poured money into the Palestinian Authority and into humanitarian aid, but it has failed to stand up and insist on its own policies as distinct from those of Russia and, even more, of the United States. I believe we could have made a much more constructive contribution had we been just a little more courageous about talking about some of the difficult things that need to be done in the Middle East, among them confronting the continued building of settlements and the completion of an absolutely illegal wall on the Israeli side, and the continuation of suicide bombings and rocket attacks on the Palestinian side. We have an opportunity which so far we have simply failed to take.
	In the constitutional amendments that I hope we will see, it is crucial now to anchor the enlargement of the European Union into the effectiveness of the Union, and that still remains to be done. This has been an impressive debate, and I say again that it shows the huge potential of this country to contribute much more to Europe than we have done so far. I say to the incoming Government of Mr Gordon Brown and his colleagues that they should reconsider whether Britain should remain grumbling on the sidelines. We have one of the worst attendance records for European Union ministerial meetings of any country in the Union, if not the worst. We cannot stay on the sidelines any longer; we must play a full part in the development of a European Union which could contribute far more than it has already to the peace, freedom and human rights of the world.

The Lord Bishop of Chester: My Lords, it is a privilege to speak in this debate among such an array of distinguished speakers. The relationship of the UK to the European Union and the wider relationships of the European Union itself have been regular subjects of debate in this House, for good reason. We are dealing with our common heritage and our common future, albeit in an ever more global context. The discussion moves on, of course. The current Union of 27 sovereign states is a very different entity both actually and potentially when compared with the Union which the UK first joined. One of the key questions in the future will be whether there is a natural limit to membership if contiguous states are able to meet the underlying criteria for membership, based on respect for human rights, a properly functioning democracy and the rule of law. I do not personally think that any limits can be set on the future expansion of the EU, although it will continue to change in new ways by dint of that expansion.
	In a historical sense, the natural boundaries were set by the very word "Europe". As a schoolboy, I was taught that Europe was one of the continents of the world, and it was only later that I realised that, from a purely geographical point of view, this did not quite make sense. Indeed, when we look at a map, it is quickly clear that what we call "Europe" is really just one end of a very large Asian land mass into which the surplus populations of Asia have in fact regularly migrated. So why did we come to speak of Europe as a distinct continent? One clue lies in the maps themselves, because before the 18th century where we would now put the word "Europe" we would usually have found the word "Christendom". In many ways, the term "Europe" denotes that part of the pan-Asian land mass where a broad and diverse Christian civilisation took root over many centuries. Modern Europe largely bears the contours of older Christendom, butwith other powerful forces shaping its current life—overtly secular currents of thought deriving mainly fromthe Enlightenment and also now significant communities formed by other religious traditions, especiallyIslam.
	In my contribution to today's important debate, I want to suggest that while there can be no dreams of putting the clock back to the older Christendom, and indeed the EU is now in prospect of actually expanding beyond it, there are aspects of our Christian heritage which can help us to face and embrace the challenges before us. By challenges I refer both to the relationship of this country with the EU itself and, perhaps even more importantly, to the relationship of the EU with the global village which the world increasingly presents to us.
	Two aspects of Christian thought have been especially important historically. The first is the basic belief that the world is created and therefore has its own freedom and independence in relation to God, even amid its dependence upon him. In Christian thought, this was sharpened by the central motif of the death and resurrection of Jesus Christ, which imported into Christian thought a strong dissatisfaction with the way the world is today and a sense of the limitation of what Governments can achieve in the circumstances of a fallen world. There was the belief that all human structures and institutions are at best incomplete and point to a different and better future in God's time. This was classically set out by St Augustine in his work City of God, and this bequeathed to European civilisation, admittedly in a patchy and lengthy way, a sense of the relativity of all political systems, and with it the accompanying values of tolerance and openness to others which perhaps are the key European values in our heritage. Good government always has to recognise the limits of its governance.
	The 20th century saw political life in Europe captured by intolerant, totalitarian ideologies which caused havoc both in the societies concerned and beyond, and we are still recovering from that. Indeed, the early vision of the EU in the post-war years was to prevent this happening again, a noble and right vision but one which does not so much require an abandonment of the religious roots of European civilisation as their proper acknowledgment; whether that is specifically set out in treaties is a secondary matter. It is simply a historical fact that these links exist. It requires a dialogue between the now fundamentally secular states of Europe, amid the varieties of church-state relationships they still embody, and of religious communities old and new which form part of the actual reality of contemporary European life.
	The key word here is "tolerance". A European Union of 27 sovereign states negotiating to expand further cannot look to a monochrome future. Its peoples want to maintain their local identities, customs and traditions, supported by the core European values which they hold in common. I sense that a change of perspective is already happening. Indeed, we hear far less today of the 27 and rising number of states in the EU moving towards what used to be called the "ever closer Union". That language has been quietly sidelined or has evolved into something a bit more fluid and open. The unity will inevitably be more pluriform than many once envisaged.
	We have often heard of the need to harmonise European regulations and laws, and questions about this harmonisation process are regularly asked in the House. This is true up to a point, but a harmony, properly understood, results from different notes which contribute to the harmony precisely because of their difference and distinctiveness. Perhaps an even better image would be the co-ordination of laws and regulations and not their automatic harmonisation, so allowing, respecting, tolerating and, beyond that, welcoming difference and distinctiveness in the communities which form the individual states and between the states themselves.
	There is a sensitive balance here, no doubt, but the integration of the new communities in this country requires an explicit welcome for their difference and distinctiveness, held within the basic values of the rule of law, participation and human rights, which cannot be negotiable in the context of our civilisation. In fact, tolerance and inclusion are two sides of the same coin. Understood in these terms, I cannot but see huge benefits to this country from its continued membership of the EU and, indeed, from the continued expansion of the EU. If a country such as Turkey can successfully be included in the EU, it can only be good both for the EU and what the EU will offer to the wider world.
	Beyond that, the major and most important gift the EU can offer a wider world is an example of tolerance and acceptance in a world where intolerance and antagonism between different ethnic and religious groups and communities is a persistent and ever-renewing problem. There are many countries where there is far less tolerance of political association and religious freedom than for many centuries; it is a very curious feature of the world in which we live. The need, I believe, is for the increasingly diverse EU—an EU in which the eventual succession of Turkey is a goal to be warmly welcomed—to offer to the world an example of a society where religious and cultural tolerance, amid quite wide-ranging diversity, can truly flourish.
	There is a danger, I believe, in arguments that that can be achieved on purely secular grounds. A purely secular state will always risk drifting towards asserting its own monopoly on truth, which is just as dangerous as a monopoly asserted by any religious group, be they Christian, Islamic or whatever. Indeed, we need Governments who acknowledge the limits of government and make space for, and have dialogue with, the whole range of intermediate institutions and communities in their midst which they cannot hope to control in detail. These include the various religious communities—both the historic communities of Europe and the new religious communities—which exist within their borders.
	In this context, we need an EU which recognises the limits to its own political, social and legislative competence to shape too many details in the lives of its citizens. That is intrinsically the whole ethos of Europe, where freedom, tolerance and welcome are the keynotes of the past and, I believe, of the future.

Lord Haskel: My Lords, I congratulate the noble Lord, Lord McNally, on the debate. Like him, I think it is important to remind ourselves from time to time that when the European ideal was introduced, for many of us it was a response to the distrust, prejudice and jingoism that had caused so much loss and suffering in the recent past. War again was unthinkable; peace was the first objective. So for people like me, the European journey is more a journey of the heart than of the mind. It means an end to conflict and strife. This is why all the arguments about economics and national interests are secondary. I suppose it is a little trite to say that we should not lose sight of the vision, but it is about the vision for Europe that I wish to speak.
	Human rights and democratic institutions have played, and still play, an important role in ending conflict and strife in Europe. But so does the single market. This is because the single market guarantees four fundamental liberties: the free movement of goods, of capital, of services and of people. Since its launch in 1986, by guaranteeing these four freedoms, a tremendous amount has been achieved. We have seen increased productivity and growth and greater wealth, not only in our own country but also in countries such as Spain, Ireland and Greece, which25 years ago were relatively poor and two of which were dictatorships. This has been achieved by opening up the market which is now the largest multi-member single market in the world. With a combination of rules and regulations and aid from the richer to the poorer states, we have all benefited from working together, referred to by the noble Lord, Lord Tugendhat.
	I do not share the disappointment of the noble Baroness, Lady Williams, in the promise of 1997. I agree that in the past few years progress seems to have slowed down. Perhaps this is because of all the new elements which other noble Lords have mentioned: enlargement, climate change, globalisation, mass migration, international terrorism and different sources of energy. Also during this time, science has progressed so that we are living longer and healthier lives, and technology has changed the face of business and industry.
	But new concerns are being raised. Although politics are rooted in the nation states, people are concerned about the extent to which national governments can operate without European institutions, a point touched on by the noble and learned Lord, Lord Howe. I agree with other noble Lords that, generally, there is less scepticism about Europe in Britain. But in the face of all these new elements, surely it is not surprising that in recent months many have turned their thoughts towards a revised version, a new vision, of the single market. This is welcome because my reasons for being pro-European mean as little to my children as they do to the children of the noble Lord, Lord McNally, even though mine are a little older.
	About a year ago, the European Commission launched a review of its vision for the single market, and in February it issued a communication calledA Single Market for Citizens. Its view seems to be that the vision of the single market should be that of the consumer citizen. It would like to see the workings of the single market made simpler and more practical, largely through the use of the single currency. This will encourage the free movement of goods and services so that the market functions better from the point of view of the consumer. I welcome this. I am not surprised as the Commission has committed itself to building bridges between its institutions and its citizens since the constitutional treaty was rejected.
	Pro-business organisations such as Business for New Europe agree. They, too, are seeking a new vision; they, too, want to see an end to excessive EU regulation, centralisation and red tape. But they see this from a corporate point of view, promoting prosperity and opportunity for individual companies rather than for citizens. So what will this mean as regards jobs, pay, living standards and quality of life for the consumer citizens?
	The European Parliament, too, is looking for a new vision. It is looking at the Commission's single market review and has appointed a rapporteur. The rapporteur's first report in April welcomes the Commission's work on reviewing the single market and highlights the importance of including all stakeholders in the process. He speaks of stimulating innovation through increased competition and the research and technology to which the noble Lord, Lord Williamson, referred; and he speaks about the creation of a more business-friendly environment, especially for small and medium-size enterprises. He is also concerned, among other things, about intellectual property rights, harmonising retail financial services and some elements of taxation. But the vision is unclear.
	The Treasury and the DTI, too, are thinking about the future of the single market. I congratulate them on producing in January this year their vision of the single market for the 21st century. Their paper has the advantage of consistency. They voice their concerns about the slowing down of progress and how the single market needs to become more competitive, more skilled and more innovative in the face of globalisation. This more dynamic and competitive single market will promote jobs, growth and prosperity. Open and free markets are an important part of their vision, and most of us would agree.
	Some would ask, however: is there a political limit to that vision? We may be benefiting from the free movement of workers from the new member states, but those very states are complaining of a lack of skills in their own economies, which is hindering their own development. Some think that we are now going to see the very innovation on which we are depending being outsourced. That is what I mean by political limits. Some see the need for a political balance regarding globalisation. As well as being open to the opportunities of globalisation, we must be politically aware of the wish of some for physical and economic security against its threats.
	Finally, there is one more institution seeking a new vision for the single market: your Lordships' House. Your Lordships' EU Committee is on the case; more specifically, sub-committee B, whose remit is the single market. Its inquiry has already started. A call for evidence has gone out, and I see no reason why this debate should not also be considered part of its evidence. The committee does not have a view yet, but I am sure that one will emerge as it draws together all the various strands and views that I have tried to outline.
	My point is simple. Without a new vision, our aspirations will, of necessity, be modest. Without a vision, economic development is, as we are seeing, tentative, piecemeal and incremental. With a vision, we can address the problems of designing the most effective mechanisms for delivering the single market, and only then can we identify the gaps and the challenges.
	I remind your Lordships of where I started. For many, the EU journey is first of all a journey of the heart. So it is with the single market: the ideal comes first, and its mechanisms come after. I hope that the Minister agrees with me.

Lord Brittan of Spennithorne: My Lords, in this timely and welcome debate, it is right to put the inevitable focus on the forthcoming European Council meeting in the wider perspective of what has been going on in Europe in recent times. If you do that, the case for negative Euro-scepticism has never been weaker. Europe's current broad economic momentum, which is currently faster than that of the United States, speaks for itself. In policy terms, there has been a steady movement in the European Union in the direction that the broad mass of British opinion favours. The Barroso Commission is perhaps the one that has been most liberal in its approach—and I use the word with a small "l"—of all the Commissions that have existed.
	I shall be the third speaker to quote the City of London brief, which says:
	"The European Commission has shown willing to press ahead with the 'better regulation' agenda. The agenda has received widespread support from practitioners in the City and beyond who have been calling for some time for both less and better legislation, and a genuine policy shift towards achieving more considered and intelligent regulation. At the EU and the domestic level, there is currently a major push towards these goals".
	If we look at the vigorous competition policy pursued by the Commission, at what it has done and, at least as important, what it has not done in the area of financial services under Commissioner McCreevy, the story is the same: a steady movement in the direction that nearly all British political parties have favoured. Reference has already been made to the new leadership across Europe, by coincidence, with a change of personnel in many of the major countries. For this country above all, this is a time of opportunity so far as Europe is concerned, not a time for negativism.
	It is against the background that we have to look at the forthcoming European Council. In some quarters, there has been an insidious argument that there is no need for change; that in spite of what was said about the necessity for constitutional change in the wake of the enlargement of the European Union, decision-making has actually been going ahead quite well. In that context, using that rather specious argument, I find it curious to hear some of my Euro-sceptic friends applauding the European Union and its method of doing business in a way that I have not previously heard from their lips.
	The reality is that just because there is not currently total paralysis, that does not mean all is well. Even in the period, steadily growing more distant, when I was a member of the European Commission, I saw that it was getting more difficult to reach agreement, even with the mini-enlargement that took place at that time. The deliberations were steadily getting more cumbersome, and will get worse. Quite apart from the desire behind the move towards constitutional change—but not a constitution—to enable business to be conducted more efficiently, there is also a legitimate desire for Europe to have a more effective voice. That was reflected in the proposals in the abortive treaty relating to foreign affairs.
	Apart from that, the reality that has not so far been mentioned is that, whether we like it or not, there is, right across Europe, an almost universal feeling that the constitutional issue must be resolved before further progress can take place, or can even be permitted to take place, on the issues that are of supreme importance to this country and to the European Union. Of course, further enlargement—Croatia and Turkey have been mentioned—is the most dramatic example, where several countries have said that no further progress will be permitted until the question of the handling of this treaty is dealt with. But also in relation to energy supply, climate change, the common agricultural policy reform and the next consideration of the European budget, no significant progress is likely to be made until the question of the handling of the institutional arrangements and of the treaty is out of the way.
	The fact is that on all the international issues, quite apart from the internal European ones, we cannot globally achieve our objectives without Europe acting together. If the constitution is out of the way, the direction in which Europe has been moving in the past few years proves that we in this county would be pushing at an open door to get further, accelerated progress in the direction with which we feel comfortable. It is important and in the national interest for agreement to be reached at that European Council.
	We do not know whether or not that will be achieved, but if it is, the general outlines will be pretty clear. Reference has been made to them several times in this debate: the abandonment of the trappings of sovereignty and the creation of a European Council president on a more permanent basis than exists at the moment. Let me stress, in the context of a discussion about a referendum, that the creation of a more permanent president would not give him more power; it would make him more effective, but would not involve a transfer of power and sovereignty. Similarly, the bringing together of the High Representative and the Foreign Affairs Commissioner would also be in the interests of efficiency and a better European voice, but would not amount to a transfer of power or sovereignty. The proposed change in the voting system would, quite simply, give Britain a larger voice in the deliberations of Europe. Similarly, scaling down the size of the Commission does not involve a change in sovereignty; further change is in our interests as we have already given up one of our two Commissioners. And I find it difficult to see how an enhanced role for national Parliaments can be regarded as a transfer of sovereignty—quite the reverse. It is a move in the opposite direction.
	As for the increase in qualified majority voting, particularly on justice and home affairs, I remind the House that that originated because of a feeling that it was impossible to get the agreement necessary to deal with international crime and terrorism if any one country had a veto. We were more concerned about other people exercising their veto on matters which were of interest to this country than in exercising our own veto. But if it is felt that that was, in a sense, a pretty modest transfer of sovereignty—although a transfer of sovereignty none the less—which we could not live with, it has been clear that an opt-out would be available. Mr Barroso said so only a couple of days ago. Similarly, I think we will be able to ensure that there is a reduced status for the charter compared with what was in the constitutional treaty.
	It is therefore overwhelmingly in the national interest to work for a deal of the kind envisaged, to support it if it is agreed and then to move on. I hope that the Conservative Party—my party—rightly and reasonably looking to be the party of government after the next election, will put national interest above short-term party considerations. David Cameron will have to deal with his European colleagues when he becomes Prime Minister and it will be one of the most important things that he has to do. I feel sure that he would not wish it to be possible for political opponents to put round his neck the leaden label of being the person who opposed reaching agreement on this issue—an agreement which, if achieved, will be regarded not as a great step towards further European integration but rather as an agreement which will liberate Europe from further sterile debate and enable it to deal with the real issues of huge importance to its citizens.
	I have always believed that a constant resort to referendums is inconsistent with representative parliamentary government and therefore inconsistent with the fundamental nature of the British constitution. But even if one does not take that extreme view, it is clear that there is a consensus that referendums should be confined to major constitutional issues. This agreement, if reached, will not be such an issue. I have shown—I hope, convincingly—that in all important respects it does not amount to a transfer of sovereignty. It is therefore important that there should not be a referendum and that that should be resisted. This treaty, if it achieves anything like the character that seems probable, will be much less far-reaching than Maastricht and the Single European Act. I vividly remember my noble friend Lady Thatcher inviting us to approve it, not with the assistance of a referendum, but with the powerful help of a three-line Whip in the House of Commons.
	I hope that there will be a success for the treaty and that Europe can then move on to deal with other vital issues in the interests of the United Kingdom, Europe and the wider world, and that the Conservative Party will assist that process rather than resist it.

Lord Maclennan of Rogart: My Lords, there are few Chambers in Parliaments in Europe which speak with greater knowledge of what is happening in the European Union than does your Lordships' House. The work of the Select Committee and its sub-committees ensures that our debates are well informed. I pay tribute to the noble Lord, Lord Grenfell, who would have wished to be here today but, because of a meeting with Members of the European Parliament and of the Scrutiny Committee of the House of Commons, is prevented from participating.
	Earlier this week I had the privilege of accompanying the noble Lord to a meeting of the European Parliament with the representatives of the national Parliaments, gathered on the eve of the Council to consider what should be the outcome of that meeting and of the IGC to follow. It may be of interest to your Lordships to know that there were few parliamentarians present who would have recognised the words of the noble Lord, Lord Williamson, about the burial of the constitutional treaty being imminent. That, perhaps, was not only wishful thinking on the part of those parliamentarians, but also an awareness that the European Union has reached a point of decision which it cannot balk if it is to be an effective agency for the enlightened, liberal, democratic and free impetus which has given it its raison d'être. That is particularly so since the enlargement which has taken place.
	Like my esteemed leader, my noble friend Lord McNally, I came to support and accept the European Union for reasons very different from those which prevail with the younger generation today. That does not mean that our views should not be heard or given weight. My earliest childhood memory is of being bombed by German bombs in Glasgow and being taken into the cellarage of our home for protection. The following day, I was evacuated to the country. We sometimes take peace and prosperity too lightly. But I will not rest my case on that vision any more than the noble Lord, Lord Haskel, did on his.
	I share the view expressed by my noble friend Lady Williams of Crosby that the performance of the European Union today is not as effective as it needs to be. If we are to contribute to eradicating the threats not only to ourselves but to billions of the world's population from a regression to barbarism in Africa, the denial of human rights in many other parts of the world and the abnegation of democracy—to which threat we directly committed hard power in Iraq—the Union's future capacity to make decisions is what this constitutional debate is about. How is the Union to become more effective, as the challenges grow, than it has been in the past decade? I do not dissent from what the noble Lord, Lord Harrison, said about beef, but, candidly, in the scale of things, there are greater challenges which we have not successfully risen to.
	The essence of the constitutional treaty, as opposed to the way it was presented, was about ensuring that member Governments and parliamentarians were capable of focusing on issues in a continuing way and not simply indulging in aspirational rhetoric. That is the danger today in the European Union. We have heard a great deal about the threat of climate change and the importance of having an energy response to secure our supplies. I welcome what happened at Hampton Court and at the last Council, in which these issues were at the top of the agenda and in which declarations were made by Governments about how they wished to work together in those areas. But the actuality is that these selfsame Governments have so far denied the European Union a direct competence to deal with energy matters.
	There is a striking gap between aspirations and delivery if one looks back at the trading emissions scheme. Its weakness in moving us towards the targets that were earlier adopted was allowing the member states the discretion, which ought not to have been centrally decided by the national Governments, about the appropriate quotas. The debate on the constitutional provisions is not ancillary, peripheral or something to be got out of the way. It is core and central to ensuring the effectiveness of the European Union's institutions.
	That does not mean that we need something comparable to the events of 1776. There were moments in the Convention on the Future of Europe when we were given the impression from some of those leading our discussions—I exclude from this the noble Lord, Lord Kerr, who I am happy to say is speaking in this debate—that we were at such a moment in Europe's history. It is patent nonsense to believe that, through the concertation of views of the individual Governments of 27 member countries, we will be able to make a continuing impact on the major problems that face us.
	The true danger faced by the Union at this time is stasis—the danger of standing still and the consequent loss of our citizens' confidence that the Union has anything significant to offer. They will take it as read that we are not about to have a European civil war. They will not see the connection between our prosperity and the decisions that appear to be taken in Brussels. There is a danger of the whittling away of legitimacy and support for the Union.
	We have seen that route tested to some extent by the Lisbon process, and its very limited successes must be recognised for what they are. What is working is what is customarily known as the Community method. The competition policy, about which the noble Lord, Lord Brittan, spoke, does deliver and requires the member countries to come together to empower the EU's institutions to take decisions on behalf of their citizens collectively, not at the level of the lowest common denominator, allowing proper democratic debate in consideration of these issues.
	I believe that the Council ahead has a great challenge to rise to. But we are fortunate in having the leadership of Chancellor Merkel, a clean mandate for the President of France, and some awareness of the seriousness of what is on option. Certainly, the parliamentarians in Brussels on Monday had no doubts about the nature of the challenge.

Lord Hannay of Chiswick: My Lords, this is a good moment to be reviewing the UK's membership of the European Union. We are only a few days away from an important meeting of the European Council—perhaps a real turning point. We are passing through a period of change in the leadership of several of the large member states. Chancellor Merkel has already brought a welcome sense of direction and spirit of compromise to Germany's European policy and to its presidency of the European Union. President Sarkozy has just come on to the stage and the right honourable Chancellor of the Exchequer will be emerging from the wings in two weeks' time. Experience tells us that the leadership of those three countries and their leaders' ability—alas, in some cases inability—to work together will make a very big difference to the European Union as a whole.
	The European Union seems ready to emerge now from the period of uncertainty that followed the defeat of the constitutional treaty in the French and Dutch referendums. The challenges that face the EU, particularly in its external policies—trade, climate change, energy security, Russia, the Middle East, Africa, Turkey and the Balkans—have seldom been more complex and more pressing. The noble Lord, Lord McNally, and the Liberal Democrat group as a whole have therefore chosen the time well for this debate.
	It is fashionable to talk about the European Union being in crisis. Oddly enough, both strong supporters and visceral critics of the European Union reach for that overused word and deploy it for their own purposes. The truth is somewhat less dramatic and more complicated. It is rather hard to argue in any very convincing way that an organisation which has, in the past few years, carried out the geographically and politically most significant expansion of its membership, regulated the chemical industry, passed an admittedly incomplete first measure to free up the service industries, sorted out its finances for the next seven years, and, most recently, capped charges for international calls on mobile phones to the applause of a wide range of public opinion is somehow hopelessly deadlocked or in a moribund state.
	However, it is equally hard to argue that an organisation which botched its last completed effort at constitutional reform in the Nice treaty, saw its next effort—the constitutional treaty—rejected by the voters of two of the original member states, is suffering from a painful attack of enlargement indigestion and having difficulty facing up to the demands of further enlargement, and regularly punches well below its weight in international negotiations has reached a point where further reform and policy development can be taken for granted or assumed to be unnecessary. As so often, hyperbole is a poor guide for future decisions.
	In recent years, there has been a major shift in emphasis within the European Union from internal policy development to external policies—to the need to define Europe's global role and to adopt policies that will defend and further its worldwide interests. The great achievements in internal policy—the single market, the adoption of the euro by 13 member states with more to come, and the freedom of movement of our citizens—will remain the bedrock on which everything else is built. They will require plenty of political effort and will give rise to plenty of tensions in the years ahead—over the modernisation and refocusing of the budget, which is to begin next year, over issues of economic governance and over the still incomplete areas of capital markets, justice and immigration. They will require robust and effective institutions—the Commission and the European Court of Justice in particular—to guard against backsliding towards fragmentation of the market and the renationalisation of industrial policy.
	The biggest future challenges will lie in the external field, and it is there that, so far, the European Union's performance has fallen far short of what is needed. I firmly agree with the noble Baroness, Lady Williams, on that point. That is where its present diffuse and confusing institutional and decision-making structures need most adaptation. A mere glance at those external challenges is a reminder of the steepness of the hill that remains to be climbed if the European Union is to realise its full potential. The Doha round of world trade remains suspended between success and failure. The cost to the European Union of failure to complete the round successfully, particularly if that failure is attributable in whole or in part to an effort to protect Europe's still far too highly subsidised agriculture, will in the long run outweigh the damage to any of the other participants.
	The post-Kyoto negotiations on climate change and limiting carbon emissions have as yet hardly begun. The European Union has given a lead withthe March decisions of the European Council. Implementing those decisions and drawing in the main developing countries and the United States to agree a meaningful package will be much harder, although last week's G8 Summit decisions are at least a step in the right direction.
	The European Union has adopted a strategy for Africa, although so far it is not much more than a strategy on paper only. The cases of Darfur, Somalia, Zimbabwe and the Democratic Republic of Congo show just how difficult it will be to turn that strategy into a reality—a work of years or perhaps decades, not of months.
	Defining an effective policy towards Russia, whose policies so far seem guided more by post-imperial nostalgia and the precept of divide and rule than by a genuine wish to develop co-operation, will require a judicious blend of firmness and constructiveness which has not yet so far been achieved.
	A case for further enlargement to include Turkey and a number of Balkan countries, which was recently fully debated in your Lordships' House, is unanswerable, and failure to answer it positively could have exceedingly damaging consequences, not least for Europe's own security. The current problems over Kosovo and the travail through which Turkey's reforming Government are passing are a reminder of the difficult decisions that lie ahead. As for the Middle East, the need for a settlement of the Arab-Israel dispute has never seemed more imperative and at the same time more elusive.
	Every one of those external challenges has in common that all require a united European policy response and a concerted European effort if they are to be successfully handled. Not one can be managed by individual European states acting on their own in disharmony. So much for those who say that a common foreign and security policy is an optional extra.
	In Europe, policy and institutional change have always gone together and this remains the case today. The case for functional institutional change, if those external and internal challenges are to be successfully met—for more coherent external policy formulation and decision-making, for a greater role for national Parliaments, and for a more equitable balancing of voting weights and a slimmed-down Commission—is surely hard to gainsay. This is not institutional change by blueprint but a response to actual policy challenges. That is the compelling argument for drawing out of the wreckage of the now defunct constitutional treaty those elements that address those challenges—for getting rid of the rotating presidency, giving more continuity and political guidance to the work of the European Council, and accepting more majority voting on a pragmatic rather than an ideological basis. There is an opportunity to negotiate a relatively modest package of institutional changes, which would respond to the interests of the European Union and this country and be good for both. I hope that that is the path on which this month's European Council will set us.
	At an appropriate moment, it will be necessary to consider how this country will ratify such a package of institutional reforms. I see no convincing reasons for moving away from the method of parliamentary ratification, which we employed for all previous amendments of the basic treaties—some of them a great deal more far-reaching than those that seem likely to emerge from any negotiations set in hand by this month's European Council. The assertion that ratification by referendum is inherently more democratic than parliamentary ratification is completely unproven. Are the protagonists in the argument for referendums seriously arguing that Germany, which has set its face firmly against the use of such instruments, is acting undemocratically, or that the newly elected President of France, who won a sizeable majority on an electoral turnout that we can only dream about and on a platform which, unlike that of his defeated opponent, explicitly provided for parliamentary ratification of a reduced institutional reform package, is similarly planning to act undemocratically?
	Surely what we need in this country is not another row about how we approve an as yet un-negotiated package of institutional reforms, but rather a coming together of all three main parties behind the policies and methods to which we would like to see the European Union committed. On this front, there seems much common ground. As one who has lived and often had to negotiate through all the main stages of Britain's membership of the European Union, I unhesitatingly say that nothing has damaged us more than the endless chopping and changing of the two main parties' policies towards Europe and the manoeuvrings for domestic political advantage, which have inhibited the definition of firm and consistent policy objectives. No other member state has suffered that disadvantage. It is surely time to end this long-running saga and define a non-partisan approach to Britain's European policies.

Lord Roper: My Lords, I certainly agree with the conclusions of the noble Lord, Lord Hannay. I would take a view about some of his earlier assessment of the preparations of the European Union to deal with the coming external challenges, but I would see things rather more as a glass half full than as a glass half empty. There is a potential within the European Union, which we have seen develop in recent years and to which I would like to return.
	I begin by congratulating my noble friend Lord McNally on having given us the opportunity to have a debate in advance of the European Council. It is a pity we do not have one normally in advance of a European Council, as the House of Commons does, particularly given the quality of the knowledge of the subject that we have in this House, as other noble Lords have said. It is a privilege to be able to debate Britain's relations with the European Union with so many of those who have played a leading part in it over the past 40 years. I know that my noble friend Lord Thomson of Monifieth, who had originally intended to speak in this debate, is particularly sorry that he cannot do so because of ill health.
	Next week is certainly critical for the European Union and for Britain's relationships. Throughout the 36 years in which I have spoken on Europe in Parliament, I have always made it clear that my reasons for wanting to see the development of the European Union was as an instrumentalist not an institutionalist. I support the European Union and British membership of it because it enables us to achieve our political and national objectives more effectively in a larger structure rather than because there is some sort of particular federal or confederal machinery. I also believe in the principle, which I think was put forward by Jean Monnet, of making institutional development in small forward movements rather than leaps. I hesitate to make the following point, speaking as I do between my noble friend Lord Maclennan and the noble Lord, Lord Kerr of Kinlochard, but I think that in retrospect the convention and, perhaps, the treaty were perhaps somewhat over-ambitious.
	There were two things necessary to be done post-Nice. It was necessary to deal with the question of weighted voting, on which a fudge had been produced at Nice. It was necessary, too, to deal with the size of the Commission. Those are two of the most difficult matters in the European Union because of the divisions that the different interests create between the larger and smaller member states, rather than between faster and slower Europeans. I sometimes wonder, perhaps a little cynically, whether the size of the constitutional treaty was not to ensure that those difficult issues were not so obvious in the large mass of that text. I very much hope that agreement can be reached on these issues next week in Berlin, in spite of the noises that we have heard coming from Warsaw.
	On the size of the Commission, the possibility of senior and junior commissioners might be a solution to be explored. There is one other thing that has not been referred to today but which I believe was a rather useful aspect of the draft constitutional treaty, which gives it an important flexibility—the way in which the passerelle or bridging concept was developed in the treaty. It took what had always existed—that there had to be unanimity among the member states—but added a very important parliamentary red card. If one Parliament were to object—apparently in this country the House of Commons—within six months of the passerelle motion having been passed, it would fall. That is a rather important parliamentary development. I accept the use of a red card there although I do not accept it in relation to the proposals mentioned by the noble Lord, Lord Harrison. I was interested to hear from the noble Lord, Lord Grenfell, that at the meeting which he and the noble Lord, Lord Maclennan, attended this week in Brussels not a single Parliament supported this idea, which was put forward by the Netherlands Government and, to some extent, I gather, supported by our own Government. This red card system for the normal process is a mistake. The yellow card arrangement, which was sorted out within the convention and the constitution, should be carried forward.
	I enjoyed the 1975 referendum but have not become an addict. I did not believe that a referendum was necessary in the case of the constitutional treaty, and made my views on that subject known to the Government at the time. In spite of its name, that treaty was not significantly more substantial in its effect than many of the earlier amending treaties. I certainly see no case for a referendum on the treaty that is likely to emerge from next year's negotiations and the subsequent IGC. I accept, of course, that some may wish to see what emerges before coming to a final view on a referendum. But in view of all that we have heard in this debate and in the current debate, it seems to me very unlikely. I can see no situation in which I would be prepared to vote for one.
	There is an important paradox that while all the achievements which the noble Lord, Lord Hannay, pointed out have occurred in the past few months, the referendum decisions in France and the Netherlands have led to a malaise within the European Union. Further referenda, which could also result in defeats, could lead to further malaises. I would not call that a crisis in view of the considerable achievements, but at the same time as this malaise has occurred in the European Union—I say that despite the comments of my noble friend Lady Williams and the noble Lord, Lord Hannay—over the past two or three years it has been relatively successful in the development of its foreign and defence policies. Its High Representative, Javier Solana, has played an increasing role in the quartet. I refer to the agreement which the European Union reached this week with the Ministry of Finance in the Palestinian Authority in order once again to start building up its institutions. The European Union proposed a mechanism and then persuaded the rest of the quartet to accept it so that finance could continue to be provided to the Palestinian Authority. A certain amount has been achieved. I refer to the large number of members of the European Union which were prepared to provide forces in the Lebanon last year.
	During its first 50 years the European Union concentrated on its internal policies. As we have heard, the challenges now lie outside the European Union in a variety of domains. We are responding to the situation in the Middle East and, to some extent, that in Africa. The European Union is largely paying for the African Union mission in Darfur. It was able to deploy at short notice into Aceh, Indonesia when a conflict needed to be dealt with. I could go on but I do not have time.
	The new challenges to our society posed by problems with the global environment, energy security and international terrorism all call for a collective European response. They are providing the new case for Europe and in many cases the response is already beginning, even if it is not adequate. If anything, Europe is becoming overwhelmed by requests from international organisations to provide forces for activities, possibly in Gaza and perhaps, at some stage, in Syria after a withdrawal. The European Union is responding to those issues.
	In my closing words I should draw your Lordships' attention to the interesting fact that this week the European Union is having its second military exercise, commanded by a British general, Lieutenant-General David Leakey, using its own autonomous operational headquarters for the first time. A few years ago that suggestion would have resulted in terrible trouble, but I am glad to say that the Secretary-General of NATO himself said last week that he thought that the European Union operations centre was a good idea and that he had nothing against it. The European Union is beginning to build the equipment which will enable it to face these international challenges, which I believe will be its primary justification. Let us hope that at spaghetti junction, or wherever it is that my noble friend said the meeting would take place next week, agreement is reached on a relatively simple number of changes which can be made, then taken forward and ratified in all member states, except perhaps Ireland, without referenda.

Lord Kerr of Kinlochard: My Lords, the House owes a great debt to the noble Lord, Lord McNally, for the timing and the drafting of his Motion, and for the eloquence with which he moved it. The debate has been of a high standard, with the single exception of the reference by the noble Lord, Lord Williamson, to parrots, which was possibly in doubtful taste. I, too, very much agree with the way that the Liberal Democrats developed the theme of the Motion by focusing on effectiveness; on that, I very much agreed with the noble Baroness, Lady Williams of Crosby, and the noble Lord, Lord Maclennan of Rogart. That is what we are talking about when discussing institutional reform and, therefore, next week's European Council.
	This will be Mr Blair's last European Council. I accompanied the then Prime Minister, Mrs Thatcher, to her last European Council. She was quite certain that the theme that all other member states wished to discuss was the wrong one. They wanted to discuss economic and monetary union, about which she thought there was no urgency. They had been discussing it for two years, since the central bankers' report, and the other member states thought it was time for decisions. We tried to change the subject and no one paid the slightest attention. We failed to change the subject and the Intergovernmental Conference on Economic and Monetary Union was called.
	From time to time, the British press seems to advise Mr Blair that he should try to change the subject—that institutional reform does not matter very much, and can be left for a few more years of desultory discussion. I am sure that he will not do that, but if he did attempt to change the subject, it would not work. Europe now feels that it needs to crystallise and settle this debate, and I think that that is correct.
	There is another difference from the 1990 debate on economic and monetary union, when Mrs Thatcher may well have been right. Mr Major managed to opt out from the new provisions on economic and monetary union written into the Maastricht treaty, but there is no way that you can opt out of the debate on institutional reform, because you are debating amendment of the existing articles that lay down the ground rules, the club rules, which govern how the show works. You cannot have one set of rules for 26 member states and another set of rules—the old rules—for us. There has to be an agreement on what the club rules should be; and opt-outs are not on.
	But why should we want to opt out? That is what I do not understand when reading the press. Is it really the case that some believe we should not want the EU to work better? Why would we not want it to work better—because we wanted it to become more unpopular, or because we wanted to break it up or to break out of it? The noble Baroness, Lady Williams, is absolutely right—we need to think of practical ways to make the system work better. British business wants that and is looking for a more effective EU with a real single market extending into financial services and energy. If the public opinion polls are correct, the British people want a European Union that is more effective in the wider world, pursuing issues like world development, the battle against poverty and the battle against climate change and global warming. That is what people want; they want more efficiency; they are not Luddites. They want the EU to work better. They want us to stay in it, and to be more influential in it. I have never seen the noble Lord, Lord Howell, as a Luddite. However, when he contributes to this debate, I would like him to address the issue of whether anyone could really be against effective reform of the working methods of the European Union that are designed to make it work better.
	I shall touch on only three possible reforms. They are not original; they come from a list mentioned by several of those who have spoken already—the noble and learned Lord, Lord Howe, and the noble Lords, Lord Brittan, Lord Tugendhat and Lord Williamson. I have mentioned three ex-Commissioners and an ex Secretary-General of the Commission. I never served in the Commission; I plan to speak about the Council. I would like to see the Council working better.
	First, I do not know what is going to happen on the voting system. The Polish proposal for a distribution of votes in proportion to the square root of population was squarely addressed, and evoked rooted objections, in the convention, as the noble Lord, Lord Maclennan of Rogart, will recall. It is a little hard to explain to public opinion why the square root of population is an appropriate measure.
	One of the most important things that happened in the convention, I thought, was that all member state representatives, national parliamentary representatives and European Parliament representatives agreed, and that agreement carried forward into the subsequent IGC, that the existing system needed reform. Not many people in Britain noticed that the reformed system, on which all member states agreed when they signed the constitutional treaty, would—I dare to say will—increase the UK's share of votes in the Council from 8 per cent to just over 12 per cent, an increase of about 40 per cent. Why? With each successive enlargement, from nine up to 27, the distribution of votes—done by an absurd horse-trading system—has been skewed in favour of small member states. So the correlation between voting weight and population has become ever more tenuous. The Germans have one vote now for every 3 million people. We have one for every2 million. Luxembourg has one for every 100,000. There is no obvious reason for that. Everyone came to accept, in the package that was in the constitutional treaty, that such blatant disparities threaten legitimacy and the acceptance of QMV decisions, and need to be replaced. The double-majority system is in everyone's interest. I hope to hear from the noble Lord, Lord Howell, that he believes that the introduction of the double-majority would be an advance.
	The second central reform—others have spoken of it—is the end of rotation of the presidency. Rotation worked beautifully in a European Union of six. It does not work very well in a European Union of 27, when the job comes round once every 14 years and thus never will come round again to someone who has done it before. The presidency of the European Council ought to be a full-time job. To travel to each of the other capitals of the European Union now twice a term, before each European Council, would take six weeks. Which Prime Minister can take six weeks off to go touring round capitals? For coherence and consistency, we do need the president.
	Finally, for coherence vis-à-vis the outside world, we need to give Javier Solana the authority to act as our voice. The cast in negotiations with third countries comes from a Viennese light opera. We have Mr Solana the High Representative, an expert negotiator and former Secretary-General of NATO, not allowed to speak until the Foreign Minister of the rotating presidency has spoken; then he may come in and correct, as a sort of Sir Humphrey to the Minister. That is nonsense. The Secretary-General of NATO, which is what he was, speaks for NATO. Why should the Secretary-General of the European Union not speak for the European Union and chair the Council, as the Secretary-General chairs the North Atlantic Council, and be double-hatted and sit in the Commission as the Vice-President for External Relations? It would make us more coherent.
	If I dare, I want to add one word about referenda. If one had an institutional reform treaty, rather short, containing measures of the kind I have described, I would not see a case for a referendum. It seems to me that adjustments to the rules of the club is a matter for decision by club members. Sovereignty is not affected by any of the things that I have spoken about. I was very struck by what the noble Lords, Lord Tugendhat and Lord Brittan, said on this subject. I would very much like to hear from the noble Lord, Lord Howell, to hear how he reacts to what they said about the absurdity of a referendum on issues of this kind. I was also very struck by what the noble Lord, Lord Roper, said, and I look forward to hearing from the noble Lord, Lord Wallace of Saltaire, how he reacted to what the noble Lord, Lord Roper, said about a referendum on issues of that kind.

Lord Lea of Crondall: My Lords, I, too, congratulate the noble Lord, Lord McNally, on the timing of this debate. He is a very good man to do business with. I accepted his offer that if I spoke in this debate he would support an all-appointed House of Lords. I thought that a reasonable deal. Actually, he would probably find the second bit of that commitment easier to deliver than some of the issues in his party regarding the referendum, but I wish him well. I have also been glad to hear all the other authoritative speeches. I picked up a new phrase for popular consumption from the speech of the noble Lord, Lord Kerr: a square-root voting dilemma needs to be addressed squarely to get to the root of the problem. That is one that I will add to my speaking notes in the future.
	The central paradox that I see in this debate is one which has not been touched on fully although it has been hinted at. If we are not to have the sclerotic Europe that everyone says they do not want, there will endless changes over the next 50 years in how it works. Are we going to say that every three years over the next 50 years, 30 countries will have to have a referendum? Let me work that out with a little mental arithmetic: 50 years times 30 countries is 150; three divided by 50 is about 18; 150 times 18 is about 1,500—no it isn't, but it's a big number.
	Seriously, however, a number of subtle changes need to be made. Can we have a two-tier Commissioner arrangement whereby some of the bigger countries always have a Commissioner, or some of the countries within a region share a Commissioner? How can the Commissioners work without introducing ridiculous portfolios whereby, because 35 people need a portfolio, someone will be dealing only with mousetraps and associated industries?
	It is not remotely conceivable that the public—this is another argument against a referendum—whipped on as they will be by Murdoch and the Daily Mail, will think it sensible to ask their judgment on this issue. Moreover, as has rightly been said, general elections and parliamentary democracy are what we do in this country. There are 400 million, rising to500 million, inhabitants of Europe. That is not 10 but 100 times the size of Switzerland. So analogies with small countries really do not stand up.
	Like the noble Lord, Lord Hannay, with whom I am on the committee chaired by the noble Lord, Lord Roper, who has already contributed to the debate, I echo the fact that, in the foreign affairs, defence and development fields, each month a new issue arises—whether it is energy, Russia, Africa or whatever—which has to be addressed coherently by the European Union. Incidentally, in the world community, the EU is quite different from London, Paris, Madrid, Rome and Berlin because it is not an ex-colonial power. I am sure that there would be suspicions of the British, the French or whoever from India through to parts of Africa, but the European Union has a different reputation.
	I am very pleased to see that Gordon Brown will be meeting President Sarkozy next week before the summit. I am sure that there has been gross exaggeration and mischievous speculation in the press about how No. 10 and No. 11 are at cross-purposes in the approach to the summit. I should have thought that Gordon Brown would get on very well with President Sarkozy and particularly well with Angela Merkel, who comes from the same Roundhead end of the spectrum.
	The noble Lord, Lord Jay, who is not in his place at the moment, was totally unrealistic on one point. He said that we cannot look at the question of a referendum now but can do so only after negotiation, but I am 100 per cent sure that he would not have advised anything remotely along those lines six months ago while he was still at his Foreign Office desk. The name of the game is as follows. Where is the line? It is where there is a notice saying, "Don't cross this line. If you do, there's a danger of a referendum". That is what everyone is thinking about this weekend. So the situation is the total opposite to what the noble Lord, Lord Jay, said. I think that escaping from his harness—one leap and he was free—has left him out of touch with that particular reality, although I agree with everything else that he said.
	It follows that we need a clear statement at the end of next week about where we are going. In other words, we need to be told, "This is where we are going: no referendum", and then there will be no wobbling. We cannot allow there to be a period of speculation on the question of a referendum. The argument about parliamentary democracy is clear, and it is clear that this is part of the regular revision of arrangements to make the whole Community machine work properly. It is not a question that needs to be looked at separately from many other far more important matters—for example, peace and war, to make a minor comparison. We will be having a general election and, on the present way of looking at it, despite all the excellent speeches that we have heard so far from the heavyweights of the Conservative Party who have experience of these matters, we expect Mr Cameron to hold his party together by demanding a referendum. That is obviously how the Conservative Party works. I am very pleased that the noble Lord, Lord McNally, is offering us hope and some degree of confidence that the Liberal Democrats will not let us down.
	A mistake is being made by those who think that, as long as we can convince each other about this, the problem is fixed. The need for a popular campaign is as necessary if there is not a referendum as if there is a referendum, and I shall explain why. Even if there is not a referendum, there must be a popular campaign for not having one because, as sure as eggs are eggs, the tabloids will run a campaign saying that there should be one.
	We live in an English-speaking country—an Anglo-Saxon country, as the French call us—and the publishing industry does not like working with people who speak other languages. I once dealt with Robert Maxwell in getting a book published in four different languages: English, French, German and Spanish. While getting the publishers to sort it out, I discovered that the length of sentences is totally different in English, French, German and Spanish, and we could not design a cover for the book which would be the same for the all the different language versions. Here, I am telling people in the publishing industry how to suck eggs, but there is a gross bias in the English-speaking publishing industry against all these different languages being spoken on the continent. It does not suit their commercial interest. However, the idea that the fourth estate can determine the future strategy of this country on international affairs is ridiculous.
	We have to look to our laurels. Samuel Johnson said:
	"Patriotism is the last refuge of a scoundrel",
	and it is difficult to counter that. I remember campaigning against having a referendum on the restoration of capital punishment. Petitions were organised in pubs and clubs and all the usual people were on the other side of the argument. Patience was needed in putting across our views but it had to be done. As a trade union official manqué, I have some experience. I wrote a pamphlet with a colleague called Europe and Your Rights at Work. People should write pamphlets on "Europe and your environment", and so on. We have to make people out there understand.
	I am glad to see that the City of London is convinced of the importance of London's success in the financial services industry, but what is sauce for the goose is sauce for the gander. The fundamental position in the Labour Party is that it was the Social Chapter, following the Delors visit in 1988, that convinced people to turn to workers' rights coming out of Europe. That is still as important as support in the City of London, and both those constituencies must be borne in mind. I shall be interested in the Minister's comments, particularly on how we are going to lead the campaign and on how a legitimate resource can be used to explain these hugely important matters. They are negotiated in Brussels but there is no way of telling the British people anything about them. I hope that, this time next week, we will have some clarity.

Lord Watson of Invergowrie: My Lords, I, too, commend the noble Lord, Lord McNally, for introducing this debate—and very timely it is, just a week before the summit.
	Despite having entered its second half century, the European Union continues to excite as much debate as ever within the UK—much of it ill-informed. It seems that we either love it or loathe it; there is very little in terms of a centre ground. I have never been able to discern much logic associated with that dichotomy, but I am pleased that not much of it has been in evidence in the debate this afternoon.
	In opening the debate, the noble Lord, Lord McNally, was right to highlight the fact that one of the aims of the EU's founders—maintaining peace between nations—stands as a pillar of their vision, and is by any standards a major achievement. I would add that as the Union has grown, it has drawn to it states, or in some instances constituent parts of states, that were formerly under fascist or communist control. Now as democracies, they play a full part in the enlarged EU, and next year, for example, Slovenia will assume the presidency.
	Another major achievement of the EU is the fact that we live in the world's largest single market, which is an example of Europe working at its best. The result is that today more than half of all UK trade is within the EU. But there is more to EU membership than shared wealth. It has opened up new opportunities for employment, travel and cultural exchange. We can now live, work and vote across Europe, owing to a legal framework which guarantees our shared right to the free movement of goods, services, capital and people. Many EU laws and directives affect key aspects of our lives: from food safety standards to employment rights; from mobile phone charges to how clean our beaches are. The UK at the same time has become increasingly influential over the policy agenda of the EU: from the development of the single market—a dynamic and continuing process—to enlargement; from regulatory reform to climate change and energy.
	Many UK local authorities, and all of the devolved Administrations, now have a presence in Brussels, as do many businesses and business associations. That is the case, too, with the larger trade unions. My noble friend Lord Lea referred to the trade unions and what they can do in terms of Europe. My own union, Amicus/Unite, has a Brussels office and a European forum of MSPs which projects the union's policies at all levels in Europe. Perhaps the best example of its effectiveness is the input the union had on the intensive drafting and re-drafting before the services directive was finally agreed towards the end of last year.
	That kind of activity is merely a reflection of the fact that much of the EU's current work programme is firmly focused on issues that affect our everyday lives—right now, such as cheaper energy, or in the near future, such as tackling climate change. Climate change has been referred to by many noble Lords this afternoon. The noble Baroness, Lady Miller of Chilthorne Domer, eloquently outlined what needs to be done. But meaningful action cannot be contemplated on a national basis; it must involve co-operation on a much wider basis than just Europe. The role that the EU can play in combating climate change is understood and is evidenced by the fact that the issue was designated as the leading EU priority for British nationals, in the Euro-barometer poll undertaken in December 2006 when 43 per cent of respondents cited it as their main concern.
	It seems that EU leaders have got the message because the European Council in March agreed an ambitious target to reduce greenhouse gas emissions by 20 per cent by 2020. Of course, there are other environmental challenges that require attention, such as the EU emissions trading scheme being widened and deepened, and greater urgency being given to building agreement on a post-Kyoto settlement, but we should be prepared to acknowledge that what progress there has been on these global issues would have been much less were it not for the EU.
	Next week's EU Council in Brussels marks the end of what has been a positive German presidency, but it will inevitably be dominated by attempts to find an alternative to the EU constitution. Eighteen member states have now ratified it in one form or another, but the constitution has been dead in the water since the people of France and the Netherlands rejected it two years ago. I believe that we need a treaty in some form because deepening, widening and strengthening the institutions should go together.
	Chancellor Merkel said that she is seeking the adoption of what she terms a "road map" for a revised treaty, but believes that the main stumbling block is Poland. The noble Lord, Lord Kerr, referred to the issues with which that country is most concerned. Certainly that country has threatened to veto a deal without changes to the voting system envisaged under the draft treaty. It seems that the Czech Republic, among others, may also prevent agreement being reached, but what will be the UK's role in this crucial issue for the EU's immediate future?
	Perhaps more pertinently for the UK's immediate future, where does the incoming Prime Minister stand on the constitution? According to today's newspapers—again my noble friend Lord Lea mentioned this—Gordon Brown, along with Tony Blair, is to meet President Sarkozy in London on Tuesday in an attempt to find common ground on a simplified treaty. I hope that they have success. But what is Gordon Brown's policy on Europe? We do not know to any significant extent what attitude Prime Minister Brown will adopt, although we were perhaps provided with a glimpse of its likely shape in the recent Centre for European Reform pamphlet, already referred to by noble Lords, published by the Economic Secretary to the Treasury, Ed Balls. In it,he spelt out what he termed "hard-headed pro-Europeanism", in which Britain co-operates more closely in areas of shared European concern, but says no to proposals deemed contrary to the national interest. He also seemed to be stressing inter-governmental co-operation rather than a stronger role for Brussels. The danger is that, should the new Prime Minister be seen to have an influence in a manner that leads to the blocking of a revised, slimmed-down treaty, that could be damaging to the UK, diminishing the voice that this country might have in future negotiations such as those on reform of the EU budget and the common agricultural policy.
	One of the problems is that, too often, the negatives of EU membership are stressed, not least by some politicians and certain newspapers. They are usually described as Euro-sceptics when, in fact, they are often plain anti-EU, or even anti-European inthe wider sense. Their negativism—through what the noble Lord, Lord Williamson, earlier described as the noise drowning out the reality—has the effect of distorting the debate on Europe. I hope that Prime Minister Brown will move that debate onto new ground, one that begins to rebuild support for the extent to which Europe has already helped to improve the lives of its citizens and is continuing to do so. I have already suggested some of the issues that could be highlighted, and Ed Balls did so in his pamphlet, particularly emphasising energy and the environment.
	On a revised version of the European constitutional treaty, it is important that efforts are refocused on a conventional treaty where the aim is to make Europe more effective, rather than a document with the characteristics of a constitution. The major issues on which the UK will have difficulty are, of course, justice and home affairs, with the extension of majority voting and the inclusion of a Charter of Fundamental Rights. Should the former be agreed, it would cause difficulty to any UK Prime Minister, because we have already negotiated an opt-out. So if it were included in a redrafted treaty, it would become a constitutional issue, making a referendum in this country unavoidable. I make no apology for saying that I cannot foresee anything more damaging than a referendum on a new treaty, not just to the UK's future role within the EU, but perhaps ultimately to our very continuation as an EU member. Some noble Lords have already highlighted the dangers inherent in a referendum. The prospect of a campaign around that is at best unattractive and at worst appalling to contemplate, with newspaper editors—not just those of the tabloids—having a field day by pandering to xenophobia and misrepresenting many aspects of what the EU stands for and what it can do for the people of the UK. It would be deeply divisive, possibly causing damaging splits within the political parties as happened with the 1975 referendum, as many will recall.
	Should the revised document be described as, or perhaps even be capable of characterisation as, a constitution, or contain major changes that can be deemed to be of a constitutional nature to the UK, its ratification would require a referendum in line with the undertaking given by Tony Blair in 2005. An amending treaty, however, would involve something less dramatic and could be taken to Parliament for decision. That would be nothing unusual, because Europe has had a series of revisions and treaties revising its rules over a considerable time, from Maastricht to Nice. That is an accepted means of doing things and, in this case, would be much less damaging both for the UK's reputation and influence in Europe and beyond.
	I very much hope that the premiership of Gordon Brown, which I eagerly anticipate for many reasons will be characterised in its early phase by a positive approach to the EU and to the UK's role at the centre of it. While, on some political issues, a Brown/Merkel/Sarkozy triumvirate would not necessarily be appropriate, on the advancement of the EU I believe it would. It appears that Chancellor Merkel and President Sarkozy would welcome close collaboration between Berlin, London and Paris. It would benefit the immediate future of the EU were that allowed to take root and flower.

Lord Inglewood: My Lords, when I was preparing my remarks for the debate of the noble Lord, Lord McNally—on which I congratulate him—it rather surprisingly occurred to me that if I am not the youngest speaker in the debate, I am certainly one of the youngest. At the same time, I am the Member taking part who has longest been a Member of this House.
	Of course, that is because I am a hereditary Peer. Over that period, two constitutional topics have generally dominated the debate on this kind of occasion: the composition of this House and Europe. As I thought about it, it struck me that there was perhaps one interesting similarity which the two topics share. If I go back to the first 15 years or so of my membership of your Lordships' House, the debate about composition was dominated by whether hereditary Peers should remain. From the perspective of the hereditary peerage, the position was pretty clear: the British constitution was such that if the peerage was conferred on one, it was conferred on one's male heirs until they finally expired, enabling them by inheritance to legislate in your Lordships' House. It was the constitutional position but, as we all know, the world has moved on. Of course, one of the problems with the European debate is that the world has moved on, but many parts of it are still hijacked by the argument over whether we in Britain should be in or out of Europe.
	This was the issue at the start. I recall some of my first political activity, campaigning in the referendum. But we have now seen the evolution of that Europe into a new kind of sui generis system of decision-making by the European nations in an interdependent world. The issue is not now about sovereignty or loss of sovereignty, but how it is exercised. That involves a new mixture of European intergovernmental and community method systems. It is quite clear that what we have in place today will change. But what will not happen is some kind of big bang, and a return to the old intergovernmentalism of the immediate post-war period. To believe that is fantasy, and seems to be curiously addictive and delusory. Instead, we will have a kind of continuous state of evolution. The danger is that we will have permanent revolution rather than no change at all.
	The first place to start increasing our influence in the wider world through the European Union is for this country to wean itself off the kind of addiction to the question of whether or not we should remain in Europe. If we concentrate on that, we are neo-Jacobites. As I said to your Lordships on a previous occasion, however much they drank to the king across the water, he never came back. If we move on, we can then collectively, as a nation, start to address the myriad real issues and abuses that we find in the European political process, in a manner likely to maximise our chances of actually putting things right in a way which we would like.
	Over the next few weeks and months, we are obviously going to see a lot of debate about the ill fated constitutional treaty and the proposed new treaty. I do not really care what any new treaty might be called; what I care about is what it does. I do not want to have—and am not prepared to vote for—a treaty which in some way substitutes Europe for my own country. Maybe the name matters to other people. So be it. So it is quite right that the idea of calling the treaty "the constitutional treaty" has been set on one side. Equally, it seems to me that the concept of the rotating presidency is no longer appropriate for the contemporary world, and the EU therefore needs some sort of boss. I am not all that concerned about what that person may be called. What matters is what he does and how he does it. Equally, the role of the European Union in foreign policy can, on occasion, be constructive and helpful, but I do not want to see it become a replacement for our own foreign policy. If it needs somebody in charge of it—I dare say it does—I do not really mind what he is called. Again, we must find a name that is acceptable to other people and, therefore, acceptable to all.
	In this debate, we must get behind the words. One of the problems across Europe is that words that sound very similar in different European languages sometimes have very different connotations and nuances of meaning in reality. We must try to find acceptable words to describe agreed and accepted functions, powers and policies. In doing this, in the context of proposals that may come from an intergovernmental conference, we must recognise that the policies will come forward in a package. We are moving from the a la carte menu to the table d'hote. It is a package, and it is self-indulgent at ratification stage to reverse engineer what is on the table and then attempt to cherry-pick the best bits. If we do not like it, we should vote against it and lose the lot.
	This phenomenon poses particular difficulties for opposition parties in our country. Domestically, they perform precisely that kind of cherry-picking on a daily basis in this Parliament. In Britain, we have not yet got to grips with the problem of what domestic opposition parties should do when on a Europe-wide basis they may be the majority. I do not think my party in the late 1990s and the early part of this century or the Labour Party in the early 1990s managed to get to grips with this problem. By definition, some time—and like my noble and learned friend Lord Howe, I hope soon—the Conservative Party will be back in government. The problems that this can throw up are graphically illustrated by the debate in the Conservative Party about where its MEPs should sit in the European Parliament. It is not a question of whether a party should sit with party A or party B; it is a matter of the party positioning itself where the nation's and its own best interests are served in the circumstances of the case, and that may change over time. The one thing that is absolutely certain is that if you want to get the wrong answer, you start by asking the wrong question.
	The other trouble in this country is that debates about European issues tend to get exaggerated and polarised because of our two-party system. The advocates of what is on the table tend to overstate their case, and the Opposition, in opposition to the Government of the day, tend to overstate the criticisms and objections. We end up by distorting the implications of what is in front of us. Whatever the new treaty may be—I have no idea—the truth of the matter is that it will not be the precursor of the new Jerusalem, nor will it be the end of civilisation as we know it and the winding up of 1,000 years of British freedom. Equally, I share the concerns for parliamentary democracy that the increasing prevalence of and reliance on referendums poses. After all, they are invariably a plebiscite on the popularity of the Government of the day on the day of the poll.
	We have to have a hard-nosed assessment of the crucial meaning of the changes that may be included in any treaty and what they mean for us in Britain in the real world. In the context of our foreign policy, itis important that what we do seems sensible and understandable to those outside these shores, be they on mainland Europe, across the Atlantic in Washington, in Moscow or in Beijing. I believe that the best way to further our nation's best interests through the European Union is to be seen and recognised as sensible people furthering our national interests by doing sensible things for sensible reasons. That has the added advantage of being good domestic politics.

Lord Bowness: My Lords, like other noble Lords, I thank the noble Lord, Lord McNally, for securing and introducing this debate and for presenting the achievements of the European Union and its forerunners in such an enthusiastic but balanced way.
	I had to leave the Chamber to attend a meeting of the European Union Select Committee for a short time, and I hope that other noble Lords have not troubled the House with the article by the chief political commentator of the Financial Times that was published this month in Business Voice, the journal of the CBI. Among other things, he wrote:
	"After a long period of stagnation, the pace of growth in Europe's largest economies has picked up strongly. Overall, the European Union is expected to expand by three per cent this year and, on present trends, by almost the same in 2008. It is also creating jobs".
	He goes on in similar vein and concludes:
	"Nor is there a danger of the UK being 'sucked in' to a European superstate. Europe's federalist tides have long receded. Whatever the nightmares of UKIP, the reality will remain what de Gaulle called the 'Europe des patries'. The political currents of today's EU are flowing in the UK's direction—more so, perhaps, than ever before during three decades of membership".
	I unfortunately could not be here last Friday for the Second Reading of the Bill sponsored by the noble Lord, Lord Pearson of Rannoch, on the implications of withdrawal from the European Union. I am glad that he is in his place and will speak in the gap. Today's debate is an opportunity to redress the somewhat unbalanced and gloomy view of things that was presented last Friday. I would not fear the outcome of any such inquiry, but that does not prevent me regretting that after so many years of membership of the European Union, our membership can be considered to be an issue by large numbers of responsible people. Why are we in the United Kingdom incapable of debating the issue of Europe without introducing the suggestion, directly or implicitly, that we would rather not be there at all?
	I read Friday's debate, and a great deal of emphasis was put on the cost of membership and rather less on the political implications of withdrawal. There has always been a political implication and a political dimension to the old European Economic Community and now to the European Union. Surely those who question the wisdom of our membership do so, and say so, because they believe that the United Kingdom is a country of considerable influence and economic power. They therefore cannot believe that if we were to withdraw, or to be seen to be seriously contemplating withdrawal, that would not have a serious political impact in Europe and the European Union. What impact would it have on those member states that joined recently, who share so many of our approaches, especially in economic areas? Those new member states cherish their freedom and sovereignty after years of it having been denied. Why is it that after those experiences they can enthusiastically embrace membership and we cannot do the same? What would the future of the European Union be without the UK? Unless we totally devalue our own political and economic importance and put it on the same level as that of those admirable countries Switzerland and Norway, which are often cited as successful countries outside the European Union, we cannot believe that we could do anything other than have a very serious effect on Europe.
	As noble Lords said on previous occasions, the proposed constitution was not the constitution of a federal state. It was a consolidating or amending treaty, and it should have been recognised as such. It was unfortunate that it was misrepresented as something different and that those who chose to misrepresent it used that as an excuse to demand, and eventually to persuade, Her Majesty's Government to commit themselves to a referendum. Many noble Lords have made the case that an amending and consolidating treaty is still required, and it should not be the subject of a referendum. The opponents of change or any new treaty always cite the French and Dutch referendums and ignore the 18 ratifications, the votes in national parliaments and the positive result of the referendum in Spain. It seems that for some people the only valid referendum results are those that say no. My fear is that if there is an agreement between Heads of Government next week, the pressure for a referendum will reappear. Yet who is not in favour of replacing the rotating president? Will not the double-hatting ofthe high representative and the External Relations Commissioner lead to a more effective common foreign policy? The recent events in Russia on energy surely show the weakness of not having an effective common European position.
	Who is against the other issues that noble Lords raised? The noble Lords, Lord Kerr and Lord Hannay, outlined acceptable and important changes to introduce in a mini- treaty. I hope that we will embrace those changes as a Parliament and will be prepared to give a lead in the country. We must put aside the misconceptions so often put about regarding the European Union and stop representing it as a conquering enemy, forgetting that it is, in fact, the construct of free sovereign states in which we all played a part. If we are to take this forward, we need to have confidence in the European Union, but it is most important that we have confidence in ourselves.
	Pride in Europe and pride in one's own country are not mutually exclusive. I agree entirely with noble Lords who say that the amended or mini-consolidated treaty must rid itself of all the unnecessary elements that are likely to cause controversy, including the symbols of the European Union. However, while I too think it important to achieve an agreement, I hope that one day a confident and committed member of the European Union—the United Kingdom—will, like so many of our partner states who have equal pride in their sovereignty and their country, be ready to see the European Union flag flying alongside the union flag, and will not see it as a symbol of something foreign and threatening but as a symbol of something to which we belong and of which we have played a full part.

Lord Wallace of Saltaire: I thank the noble Lord.
	In this Motion for debate, we have put a deliberate emphasis on British national interests and the contribution which active engagement within the European Union can make to their pursuit; that is, as Ed Balls has been quoted widely as saying, our hard-headed interests in European co-operation and in the management of global problems through European co-operation. Climate change, as a great many Members of the House have said; energy security, on which our dependence on gas imports necessarily locks us in to very close co-operation with our continental partners; the whole complex issue of economic transformation; how we manage globalisation, including the rise of China and India; the problems of crime, which are increasingly trans-national; the problems of migration; the problems of terrorism, and the underlying interests of our foreign policy and of our security with regard to Russia, the Middle East and even the United States.
	There has been a colossal failure of nerve by successive British Governments in their hesitant approach to making the case to the British public of where our national interests lie. That is closely linked to the unresolved questions of Britain's identity and of our self-image of our proper place in the world. We all recognise that English nationalism, unionism and our attitude to Europe are very closely linked. I was very pleased to see that the Bruges Group the other week held a dinner to celebrate the 300th anniversary of the Anglo-Scottish union. Unionism together; a Protestant nation against the wicked Catholics of the Continent is, of course, the whole underlying theme.
	Gordon Brown, in his British Council annual lecture two years ago, recognised that the confusions over Britain's national identity have inhibited Britain's engagement in the European Union. I hope that, as Prime Minister, he will link together the two debates. He has been active on the question of national identity but not yet very active on the question of Britain's involvement in the European Union.
	There has been a long history of governmental dissimilation on the implications of Britain becoming a member of the European Union. Harold Macmillan, after all, insisting that in spite of the Suez débâcle we were a great power, talked about the Common Market as being less important than our links with the United States and the Commonwealth. Harold Wilson downplayed the significance and abdicated political leadership and party leadership by accepting that there should be a referendum, rather than providing a clear lead that it was in Britain's interests to stay in. Mrs Thatcher revelled in the old image of Britain standing alone but, as a number of noble Lords, including the noble and learned Lord, Lord Howe, have remarked, she contributed a great deal to the development of the European Union through the single market. For those of us who were there when it was made, the Bruges speech was not an anti-European speech; Bernard Ingham made it one in his briefings to the press that evening. That is how it is remembered. John Major set out to take Britain to the heart of Europe and then drifted back, as a weak Prime Minister, to the margins.
	Now we have the question: what will be Tony Blair's European legacy? Will it merit comparison with John Major's and Harold Wilson's? The past10 years, after all, have been marked by a widening gap between the realities of close co-operation within the European Union and the public presentation of British Government policy. A real hypocrisy of a Government who have recognised what Britain's interests are but have spun policy in a different style, or, at least, allowed the media to spin developments differently.
	It did not, of course, begin with this Government. I remember reading about the occasion when the question of what symbols the European Community should adopt was under discussion. The British delegate said, "She will never agree to a flag, but if you agree to a common badge and then put it on a flag, that will get past the British Prime Minister". I can assure the House that that is part of the origins of the European Community flag.
	Let me give two examples of what has happened under the present Government. First, defence co-operation was a British prime ministerial initiative in the summer of 1998, taken by Mr Blair to St. Malo, where the British and the French took the lead, with President Chirac reshaping French forces on the British model and calling on others to follow. In the two years thereafter, British Ministers and officials led in developing the common policy. But when the Daily Mail two years later began to talk about a "European army", wearing jackboots, of course—"jackboots" being a favourite phrase of the noble Lord, Lord Pearson of Rannoch—the Downing Street machine went silent, as if all this had nothing to do with us. So we now have in Brussels a Foreign Policy Secretariat, working to Javier Solana, led by a senior British diplomat; a European Union military staff led by a British general; and the European Union Defence Agency led by someone on secondment from the British Ministry of Defence. But, of course, it has nothing to do with us and we are really not doing anything there, are we? It is an absurd contrast. Ministers do their best to keep our active engagement secret from the British press. The same is true of police co-operation and immigration. When I was chair of your Lordships' European Union Sub-Committee on Justice and Home Affairs, we visited the National Criminal Intelligence Service and found ourselves faced with enthusiastic British policemen saying how useful to their pursuit of crime the new initiative was.
	On extradition, we now discover that when one of the suspects in the London bombing was arrested in Milan, we could get him back to Britain in a week, instead of the six to 18 months that it took us a few years before. When British citizens are ripped off by fraudulent holiday rental schemes in Spain, we can now do something about it. When British criminals hide in Spain, we can now do something about it. When the flow of smuggled illegal immigrants from southern China and south Asia is diverted through West Africa to the Canaries and across the Mediterranean to Libya, that is where Britain's interests in controlling immigration and people-smuggling are at stake.
	Again, successive Home Secretaries—and there have been a great many of them—have said nothing about that, and the media focus only on threats from Brussels. We opted out of Schengen formally and then quietly opted back into as much of it as we possibly could. When it comes to the new treaty, no doubt we will try to opt out officially of those dimensions and then slide back in without the Daily Mail noticing.
	In his speech to the Reuters Institute in Oxford, the Prime Minister attacked the feral media. He has bitten the hand that has fed him for the past10 years—too late, I suggest. His legacy will be marked by the Faustian bargain that he made with the Murdoch and Rothermere press. As several noble Lords have said, we must hope that our new Prime Minister will be more honest and provide firmer leadership on European issues both at home and on the Continent. I appreciate the comment of the noble Lord, Lord Harrison, that he hoped that the new Prime Minister will surprise us. So do we all.
	Of course we have to negotiate hard to promote our national interests and we do not always win. I agree with much of what the noble Lord, Lord Jay, said about those areas in the European Union where British interests are not well served. We have some hard budget negotiations to begin next year. We have not yet entirely won the battle against the protectionist strain among the southern member states. Fisheries policy remains an area in which implementation is extremely poor, but that is an area where British interests would be served by stronger EU-level powers to ensure that policies are properly implemented on the high seas and in international ports.
	We are rarely outvoted in the Council. QMV is not a threat to Britain. Germany is far more often in the minority than France or Britain. Multilateral negotiations are about compromise agreements, not about victory or defeat. The style of the House of Commons—which is all about victory or defeat, all or nothing, Governments and Opposition—does not prepare British politicians very well for the coalition politics of Brussels.
	We have talked a little about the constitutional treaty and the amending treaty. I think that all of us here find ourselves in the pragmatic camp, as against the old believers who still will want to pursue the old project, but some amendments to the treaty are in the British interest: a more effective foreign policy; a smaller Commission; even more qualified majority voting among 27 member governments.
	The Liberal Party has always been a party committed to international co-operation. We believe that international co-operation starts with European co-operation. If we cannot work closely with our neighbours, it is unlikely that we will manage to work closely with other more distant states. It is in Britain's hard national interest to work for a more effective European Union. That requires Britain to play an active and constructive part, not to bump along behind the others, reacting to their proposals. That also requires Her Majesty's Government to explain clearly and consistently to their domestic public, through the domestic media, how British national interests are best pursued through co-operation with our European partners and neighbours.

Lord Howell of Guildford: My Lords, like others, I am very grateful to the noble Lord, Lord McNally, for initiating an extremely interesting debate. I am grateful for all the advice I have had on what I should say. If I were to answer them all, I would need twice the time that one is allocated.
	In a typically robust speech, the noble Lord said that he did not regret his youthful enthusiasm about the development of the European Common Market, then Community, then Union. Nor do I. I was one of the earliest visitors, I think, to the Commission, then in the Avenue de la Joyeuse Entreé in Brussels. It was in those days, more than 40 years ago, a wonderful escape route from the dingy, socialist, defeatist Britain which somehow was created in the post-war years. This was the route to a more bracing, balanced, market economy approach which was going to lift us out of the passenger and backslider status to which we had found ourselves drifting.
	I say that because I emphasise that we—I speak as a lifelong Conservative, and by "we" I mean the Conservative Party—are, and always have been, good Europeans, unlike the government party, which has had one or two moments of departure from good Europeanness. We want as much as anyone, and more than some, an open, free-trading Europe, flexible in its arrangements and practical in dealing with the major regional issues of Europe and beyond. One common theme that has emerged from this debate is that we should emphasise and concentrate on the practical matters. That has been reflected in the debate, particularly in the speeches of the noble Lord, Lord Williamson, and my noble friend Lord Tugendhat. My noble friend Lord Inglewood made an exceptionally positive speech and the noble Lord, Lord Wallace of Saltaire, spoke about the pragmatic camp. That, surely, is the right camp to be in—the camp of pragma. We should concentrate on the things within the control of our Governments and institutions and avoid airy-fairy target building and ambitions and visions which raise everybody's hopes and then disappoint.
	My fear is that today, as we debate just under the lee of this new move for a new treaty, while vast new Asian capitalism emerges and billions of new capitalists are being created with immense financial and economic power, we still see a European Union that is in danger of not putting at the top of its list how to meet these new conditions but is obsessed with the minutiae of organisation and is straining at the leash to increase its central political powers. I do not know that, because we are all still in the dark on what the outgoing Prime Minister is tying up on a new constitution, and that is pretty deplorable. Will it be disguised with a new sauce poured over it and a new flavour? I have no idea.
	However, we know that a vital pledge is being broken. Whether it was wise or not, it was a pledge. The Labour manifesto, on which the Government occasionally like to put weight, said about a new constitution:
	"We will put it to the British people in a referendum and campaign whole-heartedly for a 'Yes' vote".
	I do not know against what background that was written, but the latest independent polls show that83 per cent of British people want a referendum, as do 75 per cent of people in the entire European Union.
	Some wise doubts were expressed in the debate, notably by my noble and learned friend Howe, and, in a slightly different way, by my noble friend Lord Tugendhat, about referendums. Of course they are tricky and the idea that you rush to a referendum on every issue—medium, small or large—is questionable. One has to be careful. We may see a proposal for new transfers of constitutional powers, new developments in criminal justice law and other aspects of our legal system. Maybe, to go back to the words of the noble Lord, Lord McNally, this is a game we should turn up for if the vast majority of people feel that that is the right thing to do.
	Of course, it is a difficult judgment and we cannot make it until we know where the "fundamental change" is, to use the phrase that the noble Lord, Lord Triesman, likes to use—whether that is really justified by what is going to be sewn up. If one thinks about it, two pledges have been broken. There was a Labour manifesto pledge that there would be a referendum and now, apparently, there will not be one. The other was that there would be wholehearted campaigning. I have seen no sign of wholehearted campaigning from the Government, merely a rather furtive drift which could be carrying us further back to the camouflaged constitution idea and away from the limited overhaul which is what the Prime Minister wanted. We will have to see, because we have no idea.
	At the moment, the stronger Europhiles and people who advised the Prime Minister earlier, such as the very able Sir Stephen Wall, say that we must "bite the bullet" and agree to changes for a more integrated Europe. That view is locked in the past. I sometimes feel that not only is it locked in, but someone has thrown away the key. We have heard a bit more of it today. Indeed, to turn to the Lib Dems who initiated this debate, I see that one of them in the European Parliament said that if the English can be defeated then the opposition in Prague will disappear. That is an extraordinary view to take of how we are trying to tackle important negotiations about the future shape of Europe.
	When will those people understand that integration and central consolidation are yesterday's ideas in Europe as much as anywhere else? The problem is not only that we are being badly treated and that a mockery is being made of government calls for more transparency, openness and involving the public and so forth, but that the whole trend of thinking tends to be in the wrong direction. There are constant calls for a single voice for Europe and a single, not just a common, foreign policy, with an EU Foreign Minister. That kind of language shows no understanding of how the world now works in the information age. I was glad to hear my noble and learned friend Lord Howe warn against the adoption of the Foreign Minister label.
	Of course there should be co-operation on specific issues, but building up the idea of a single Minister for a single policy is a route to great disappointment, because the 27 members, soon to be 28, have a very different set of interests. I welcome the enlargement process as much as anyone, indeed more so. On the whole, it has been very well managed. There is more enlargement to come. However, those differences will not get smaller as enlargement goes further. When countries in the Caucasus want to join, such as Azerbaijan, or countries in North Africa, or even earlier with the applications of Turkey, Belarus, the Ukraine and all the others, and with Croatia just on the brink, the differences are bound to be very great indeed.
	In the UK's case, our interests are growing daily with the rise of Asia. Our Commonwealth network, which has been deplorably neglected in my opinion, has just as much or even more potential when it comes to pursuing our international interests as a fractious European bloc.
	I do not think there is much more to be said when it comes to energy policy, which has come into this debate a little. We talk about a common energy policy, but it is not entirely in Britain's interests to be totally entangled in western continental Europe's heavy and growing dependence on Russian- supplied gas. I note that there are all sorts of declarations that dependence on Russia will be reduced, but the reality—we must face realities in this House—is that dependence on Russia and continental Europe for daily gas supplies will increase to 70 per cent. Binding targets or no binding targets, that is what will happen. It is far from clear that it is in our interests in Britain to be so dependent on that system. We should possibly stick to closer and more trusted friends, such as Norway.
	The same goes for development and aid programmes. We all remember what Clare Short said about the EU system—that it was the worst aid system in the world. We should clearly think more clearly about who manages our aid programmes.
	The irony is that we probably need not a mini-treaty of the kind that Mr Sarkozy will propose next week or a camouflage treaty of the kind that ex-president Giscard d'Estaing warns about in today's press. What we and the European Union probably need is a bigger treaty—not opting out of reform, as the noble Lord, Lord Kerr, suggested, but a bigger and very different treaty from the one that is now being partly smuggled past us. The treaty that we need is one that brings the European Union into the modern world and makes decentralisation and the return to national Parliaments of the overloaded centre's powers the main theme and stops the relentless slide of powers to EU institutions. Obviously, the acquis needs putting into reverse—but you can bet that there is nothing in the draft that we are about to see, mini or otherwise, which refers to that. Obviously, we need to keep our social and labour market policies as close as possible to the workplace, all the more so in the information age, and at a client level. You can be sure that there will be nothing about that in the treaty. On the contrary, it looks as though the famous European Charter of Fundamental Rights is still going to be there, even though covered up by a blanket.
	Will this amended treaty help the smaller states? I counsel those who say that we should encourage the bigger states to be a little careful, as the bigger state dominance of Europe did not serve us too well in the 20th century. We should always think of the smaller states, but will the treaty do that? No, it will do the opposite. Will it increase efficiency—something else that the noble Lord, Lord Kerr, wanted me to comment on. If we are to have more limited ambitions and powers in Europe and a smaller acquis, let us have more efficiency in dealing with it; but if we are to have more and more powers, more efficiency in churning the endless sausages out of the sausage machine is a very questionable gain indeed.
	The EU is crying out for reform, and we must not underestimate our influence, as my noble friend Lord Bowness said. What I deplore most is the loss of initiative by Her Majesty's Government in all these matters. Most people have insisted that reform is required on modern lines. Indeed, the last constitution was rejected because it did not deliver that. Instead, we have let the initiative pass to those who, for whatever good reason, try to drag us back into the past and into the cruder forms of 20th century thinking. Their minds have failed to adjust to the difficult lesson that the information age, the microchip's staggering force and the worldwide web have all dispersed power, for better or worse, and made old blocs, old centrism and old methods of top-down government largely redundant. That is the worst tragedy and the greatest change. I do not deny that a reformed European Union can benefit us and be in our hard-headed interests, as noble Lords have said, but I deny that it is our only destiny. There are much wider fields to concern us, in which we too can prosper.

Lord Triesman: My Lords, I pay full tribute to the noble Lord, Lord McNally, for giving the House a chance to debate this very important issue. The Government welcome the long-term contribution that he continues to make on these debates. Parliamentary debate and scrutiny on all EU issues is essential if we are to ensure that Europe continues to reform and to deliver for its citizens, and that Britain remains fully engaged with the EU. I thank all noble Lords—not only those who have taken part in the debate, but others such as the noble Lord, Lord Grenfell, who was mentioned—who contribute so much on other occasions.
	For a while I thought that the noble and learned Lord, Lord Howe of Aberavon, was right and that the propositions that were being discussed were shared, at least sometimes, among the major parties. Having heard the conclusion from the Front Bench opposite, I am not certain that he is entirely right, although I wish he were. I am certainly with him on the case for an amending treaty—the Prime Minister has committed himself to that—reflecting the demands and the practicalities that enlargement has caused. The noble Lord, Lord Williamson, focused on just such sensible content. He advised that we should avoid unnecessary symbolism. I think that was echoed by the noble Lord, Lord Tugendhat, and I fully agree with it. The points made about the high representative, the External Affairs Commissioner, the rotating chair and presidency and the difficulties those cause are practical issues which should be grasped and dealt with. Having to make a clean start every six months on an issue such as how we deal with Somalia is scarcely ever likely to get us to the right point; it does not help.
	We will have far less difficulty with the Charter of Fundamental Rights, as it brings together existing rights but not with the force of law. In our view it should not extend EU competence but I do not intend to speculate on what may be proposed at the Council meeting. As the noble Lord, Lord Roper, said, on that, or indeed other matters, we shall see what flows from the discussion. That will tell us the character of the national decision which we will have to make. It will either be something fundamental that meets the requirements honourably put into our manifesto, or it will be very different and will draw together things which do not require that kind of decision. I say to the noble Lord, Lord Howell of Guildford, that there is no smuggling in of anything here. The plain fact remains that if it was a matter of a fundamental change and a constitution which was fundamental in any of those senses, it would be put to the British people, as we said.
	My noble friend Lord Lea made important points about the referendum process and the campaign. I say to him and to the noble Lord, Lord Wallace of Saltaire, that campaigning is very important but sometimes it is none too easy in these areas. There is not much about Europe which is entirely and immediately intelligible. Sometimes such obscure language is used that it is not that easy for anybody to penetrate it. I was intrigued by the injunction of the noble Lord, Lord Wallace, that the Government had allowed the media to spin this country's interests. I do not know what could be done in terms of permitting or restricting the media in the way that they describe Europe, but if he has any good suggestions I am entirely up for hearing them. I have no doubt that they will be very pragmatic.
	I assure the noble Lord, Lord Kerr of Kinlochard, that we shall not opt out of any part of the discussion, nor shall we try to change the agenda. Obviously, we want a practical debate within this agenda, which was also one of his demands.
	This is the 50th anniversary year of the signature of the treaties of Rome. We should reflect and celebrate the achievements of the EU over the past half century. I share that sentiment with the noble Lord, Lord McNally. I was intrigued by recent debates—I know that he and I share a view about this—in which it was said that, had people looked at the EU at the beginning in other than purely economic terms, we would never be where we are. But we did look at it in other than economic terms. I refer to the 1971 White Paper that the Conservatives helpfully put before the peopleof the United Kingdom to set out what was involved in the development of Europe. Paragraph 7 stated that our country would be more secure, our ability to maintain peace and promote development in the world greater, our economy stronger and our industries and people more prosperous if we joined the European Communities than if we remained outside them. Reference has been made to the ever closer union among European peoples in the preamble in Article 2. Paragraph 24 stated that common policies and common action were needed in matters of foreign policy. I do not think that anybody can say that the thing was not properly discussed.
	For those reasons I welcome the fact that the noble Lord, Lord Howell of Guildford, said that he had been close to this project for a very long time. It must fill his heart with joy to see this side of the House reformed in that regard. It was a journey that the Labour Party was bound to have to make and I am very pleased that it has done so. His speech, finally, was so hedged with difficulties that it is very hard to see what we can or should do in any of the circumstances that will face us—we should be in but we should not be entangled; we should not be out but we should make friends in a variable geometry way. I just wonder whether those friends will not look at us and say, "You look pretty inconsistent to me". I do not think, with great respect, that that is the way in which we will make progress.
	I say to the noble Lord, Lord Pearson, that I replied to last Friday's debate last Friday, and I do not think that the House will be pleased to hear a significant repetition of what was said. This House, in my view, relies on the knowledge, experience and service that people bring to it when they come to this House; and it is perhaps a touch spiteful, if I may say so, to suggest that people say what they say because they have some obligation as a result of their pension. We will always put these issues—as we do today—to Parliament. Negotiations may, at key moments, be behind closed doors. I can only say to the noble Lord, having spent a great many years in trade union negotiations and commercial negotiations, that I rarely did the whole of them in public before we got some way into the process. That may be an inconvenient truth about negotiating, but it is a truth that everyone who seriously does it will recognise.

Lord Pearson of Rannoch: My Lords, there are20 minutes on the clock. Did I understand the noble Lord to say that the Government will hold debates in both Houses on their intentions for the forthcoming summit on 21 and 22 June before the Prime Minister signs up to anything, or is it all being left to the usual historic abuse of the royal prerogative? I also asked a question about secrecy.

Lord Triesman: My Lords, I have said that we will always hold debates on Europe in Parliament, as we are doing today. I do not accept the assumptions that the noble Lord makes, and I am not going to be drawn into a question that is based on a wholly false premise.
	We face a very different set of challenges today from those of 50 or even of 10 years ago. Globalisation of the world economy, climate change, terrorism and organised crime are just some of the new challenges that we face. We need to work in many multilateral settings, and not least alongside our EU partners and the Commission to ensure that the EU responds to this century's and this country's challenges as it did in the last century and that it has the policies and mechanisms to ensure that we can do so. If the EU is to provide an effective response, it needs to continue to develop and reform effectively. That is one of the functions of change; I doubt that there will ever be a steady state in that sense. That is why our continued active and constructive engagement with our partners is so essential, to continue to shape how the EU develops within its borders and how it operates beyond them. This is not a day to deal with the euro, in response to the noble Lord, Lord Taverne, although of course it would be intriguing to do so.
	The European Union can look outwards and it is capable of doing so in pursuing policies that make the lives of Europeans better. That is the fruit of 10 years of being at the heart of Europe and 10 years of engagement by this Government. If the noble Baroness, Lady Williams, would be so good as to go back to the speeches made to my party's conference by the Prime Minister, she will see that it has always been there. The views expressed in the full glare of the media are not always approved by the media. There are difficulties. Schengen has come up several times in the debate. If we have shown some reservations about that, those of us who are concerned with having properly and significantly successful border control have a continuing debate to have with our European friends.
	To take one of the most recent successes, let us look at how the enlargement of the European Union has brought greater diversity, but with it greater complexity, to the organisation. It is creating new markets and has spread what I am proud to call European values of tolerance and respect for human rights across a continent that was divided by wars for many centuries. Like the noble Lord, Lord Maclennan, I think that it is vital that each generation understands the origins of the project; the noble Lords, Lord Teverson and Lord Clinton-Davis, made similar points. The changes that have happened over this period, from the end of World War Two through reconstruction to the end of the Cold War, are the extension not just of markets but of our peace and democracy, and they are political as well as economic triumphs. The noble Lord, Lord Brittan, said with some force that these changes are bound to be considered in terms of our institutions as well as of our sentiments. That is certain to happen. In this context, there is no proposal to transfer sovereignty, nor would we accept such a transfer. The noble Lord, Lord Maclennan, who unquestionably sees the big picture of empowered institutions in this, should not mistake the process as being one where we look for the lowest common denominator. That is not the proposition, nor would it achieve public support.
	I turn to the future. Like the noble Lord, Lord Jay of Ewelme, I think that if we are to make more progress we need to be candid about difficulties. On the EU and its role in economic competitiveness, I say that through the EU we have been able to deliver a level of prosperity that could not have been achieved by a medium-sized economy on the European sidelines. But we must continue to adapt to ensure that the EU responds to new economic challenges. Hard-headed support—that phrase has come up a few times—was admirably described in Ed Balls's CER pamphlet, Britain and Europe. It focused especially on what the City, finance and business can do; as the noble Lord, Lord McNally, said, they are the kinds of areas in which we will get the greatest progress. The noble Lord, Lord Tugendhat, quoted from that leaflet and distilled the positive case.
	The challenges of the 1990s were perhaps internal to Europe. The single market barriers to delivery on the promise of the four fundamental freedoms had to be broken down. There were successes in areas such as goods and services, telecommunications and transport, and the benefits are significant and well established. In other areas—for example, the network industries—we are only now getting to grips with what is needed for the single market to succeed. The EU must now increasingly face outwards and ensure that it is globally competitive. The noble Lord, Lord Howell of Guildford, often makes that point, and I agree with him. Competition will become more intense as rapidly emerging economies catch up with the EU. There has been brief mention of China, India and Brazil, which are all good examples of that. The EU is a cornerstone of the UK's clout in these global markets.
	We could—and some would urge that we should—simply trade individually with those countries but, like all EU members, our trade is bolstered by the reliability of our continent—by its stability and the fact that everyone trades more and trades better. The noble Lord, Lord Jay, referred in the first sentences of his speech to the business community, and it is absolutely clear that business regards the EU as the only intelligent way of driving forward. The Lisbon and Hampton Court agendas were both attempts to make sense of this rapidly changing world and build a fair and competitive economy that can lead in global terms, focusing increasingly on the drivers of modern competitiveness. Getting the right balance between that and the social and working rights elements is also vital for a decent society in which people enjoy their rights in a proper way.
	The Commission's ambitious better regulation agenda has been discussed several times in the House. I shall not dwell on it, but it is focusing now on alternatives to legislation in complex areas such as financial services or carbon pricing. I welcome that and Europe probably needs to do more of it. That is why the Government welcome the Commission's review of the single market, because we agree with the Commission that the need to reconsider how we deliver a more open, flexible and outward-facing single market is important, and we need to identify the best tools to achieve that.
	My noble friend Lord Haskel mentioned the joint Treasury-DTI paper, which contains the Government's views in this area. We want a greater use of market-based evidence, a shift away from the idea of completing the single market towards a dynamic concept of continually enforcing single-market principles wherever needed, and more use of competition policy, not just legislation. I endorse what he said about citizens' engagement; enforcing fundamental freedoms is not just about benefiting business, although it does that. For example, lower mobile roaming prices benefit business, break up cartels and give citizens greater rights. Therefore, I thoroughly support the comments of the noble Lord, Lord Brittan, on the importance and strength of competition policy in creating opportunity and helping to push us all in that direction.
	I turn briefly to the EU's role in foreign policy and defence priorities, an issue raised by the noble Lords, Lord Roper and Lord Jay. The common foreign and security policy has developed considerably since 1992 and now makes a significant contribution to peace and security around the globe. The process has not been easy. Foreign policy is understandably anarea where member states—the 11 in 1992 and the27 now—rightly defend their autonomy of action, and there have been high-profile disagreements, not least about Iraq. But where we agree, increasingly often—Iran is a very good example of that—it makes sense for us to use our collective power and influence, because it works better. The noble Lord, Lord McNally, made the point about relations with Russia, which is another good example, and the noble Lord, Lord Bowness, set out the conditions that we need in this sphere to do the job effectively. We work in tandem with our EU partners not because we have to but because we choose to and because it works.
	In many situations, together we have far more weight. That is a fundamental truth not just about the EU but about the entire system of multilateralism. When we speak in concert, our demands, or our condemnations, carry that much more weight. I can say at first hand that I have experienced that in trying to move the Sudan/Darfur problems along, and that we may be starting to make some progress now on matters such as the hybrid force precisely because we have stuck to that, as I hope we will in Burma and on other problems. We badly need to be able to do so in ensuring that we have biting sanctions against reprehensible Governments such as Robert Mugabe's.
	I say to the noble Lord, Lord Wallace, that I do not think that we have anything to defend about the way in which we have handled defence, or a great deal to defend about how we have tried to get a good story told about Europe. I noticed earlier at the Bar, at different times, both Denis MacShane and Geoff Hoon—indeed, I notice my friend Denis MacShane again. If people check through the press cuttings, they will see a continual parading of arguments about the value of Europe demonstrated in what we say. In the case of the Home Office, John Reid has repeatedly made statements on the juxtaposed arrangements with France—and very positive statements too, welcomed by President Sarkozy. The European security and defence policy was a Franco-British initiative. It was a bold move and I believe that it is showing success in many areas.
	NATO is, however, still the only means for the collective defence of Europe. The EU member states have agreed that this is not a role for the EU. The ESDP is designed to complement our efforts in NATO by allowing the EU to share the burden of international crisis management. There is no hiding from the fact that not all members of both organisations have exactly the same vision about how they should develop, grow or interact. We need greater clarity, but we all share the positive impact on the ground and the need for that. In the upcoming ESDP missions to Kosovo and Afghanistan, the EU and NATO will be operating in the same theatre, and I believe that they will do so with success. Our objective is both effective co-ordination on the ground and strategic partnership between the two organisations.
	There is still the challenge of reforming the EU's budget. It is essential to achieve our aim of a modern, outward-looking EU, enabling member states to respond to the challenges of globalisation as well as delivering opportunities, fairness and prosperity for everyone. The UK wants radical reform in how the EU spends its money. There is no secret about that, and we have healthy debates with our partners about it. The common agricultural policy is particularly wasteful and is still indefensible. Almost $2 a day in subsidies is received for each cow in Europe, double the average income for an African. Gordon Brown has pointed out that agricultural protectionism costs Europe and America $300 billion a year, six times the amount spent on aid in the poorest parts of the world. I was very pleased that the noble Lord, Lord Hannay, also focused on the CAP. It proves beyond a shadow of a doubt that reform is not simply a budgetary challenge, but a moral issue when you think about how money is spent. It is also an issue for us to consider when we say that we want the Union to be committed to poverty eradication and global fair trade. We see the impact of that most visibly in Africa.
	I share the view of the Commonwealth Secretary-General, Don McKinnon, who described EU farm subsidies as,
	"flagrantly arrogant, immoral and self-centred",
	and in disregard of the poor of the world. I mention that not because I want to be unkind or hostile but because I want us to identify the work that we still need to do for greater success. Since our presidency in 2005, a wide-ranging review of the EU budget, including of the CAP, in 2008-09 has been agreed. It must help us to achieve our vision of an EU budget which is truly fit for purpose in this century and in a globalised world economy.
	We need to ensure more effective EU action through further application of the principle of subsidiarity. This has been a priority for the Government. We have consistently supported a greater role for national parliaments; indeed, some of the scrutiny role that might be involved in the discussions of an amending treaty may very well have great effect on this point. These are all important issues and we must ensure that the principle is not breached. Better implementation of subsidiarity can help us to strike the right balance between action at regional, national and EU levels, and to connect citizens across Europe in the decision-making process. The Minister for Europe reiterated the Government's commitment to the subsidiarity principle in his Written Ministerial Statement of December 2006. It will be one of the six priorities for the UK in negotiations on the future of Europe.
	My noble friend Lord Harrison expressed the view that, in advance of the EU Council meeting, it is not wise to be certain about what will come out in the detail and what will happen on QMV and so on. I share his view that we should wait to see what comes out, what is proposed and what the balance of interests is and then debate those issues. I can tell him that our relations and work with the Government of the Netherlands are wholeheartedly good, and that we support the aim of meeting the Copenhagen criteria, but each country must consider that on its merits. We are opposed to any new hurdles being introduced.
	The debate to be had in your Lordships' House on the yellow card issue is probably a long one and perhaps not for today.
	For all the achievements, there is still a good deal to be done, not least in areas concerning the environment and related matters, as raised by the noble Baroness, Lady Miller. However, we are certainly in a better position to take some of the lead, particularly following Nick Stern's report, although I hope that others will feel that they can be part of that lead on a collegial basis.
	We are not isolationist and we have no role as an isolationist entity in the kind of world that we live in. President Clinton rightly described the achievement of the new architecture of Europe as the greatest and most successful example of fixing in place peace and community. That is not a ground for being complacent, but I share with the noble Lords, Lord Inglewood and Lord Bowness, the view that we should stop dancing around the issue of whether we are in or out—whether the decision has finally been taken—and get on with the practical issues of dealing with this changing environment and the need to change alongside it. I hope that, in saying that, I am not putting words into their mouths.
	In conclusion, in the briefest terms, there is much that we need to do on the international stage, and the process of enlargement will help us to do it. My noble friend Lord Harrison called on us to work with new members in new solidarity and new alliances. I am with him on that. The right reverend Prelate the Bishop of Chester said that the boundaries within which these new allies and friends come to us will probably always move further outwards, and I agree. I also agree with my noble friend Lord Watson of Invergowrie, who emphasised the concerns of citizens in all the new member states. We share those concerns.
	The noble Lord, Lord Williamson of Horton, guided us towards a realistic judgment, which we must make, about what the greatest benefits to our country are. He spoke about how the diverse strengths of Europe should work together to provide leverage to the strengths of our own country. His example of the seventh framework is telling. Both basic and near-market research are indeed fundamental to our economy.
	This has been a tremendous debate. We have a lot of work to do as we go forward, but it is worthwhile work, which is not always the case I do not agree with Euro-sceptics but I understand that they are part of a crucial debate. I have somewhat less sympathy with Euro-phobes. Phobia is a sort of neuroticism and it leads you to feeling jumpy and inconsistent when you try to judge things. Rather like the noble Lord, Lord Wallace, I have even less sympathy with Euro-psychotics. Their view is the hardest of all to take. I suspect that they go to bed each night thanking the Almighty for the existence of the English Channel on the grounds that it will block cyber-crime, CO2 emissions and avian flu. I just advise them to think about the world we live in.
	These borders and boundaries no longer have a meaning, and unless we work in an international and co-operative way with those democratic and peaceful nations, many of whom we have brought to peace and democracy, our chances of dealing with these issues are not negligible; they are zero. Let us work on those things and celebrate the means that we have achieved to work on them. That is the 21st century and it is very different from the past.

Baroness Royall of Blaisdon: My Lords, the noble Lord is not in breach of any order of the House but as this is a self-regulating House, it is clearly the will of the House that we move on to the noble Lord, Lord Wallace.

Lord Naseby: My Lords, I beg to move that this Bill be now read a second time. I start by paying tribute to Sir John Butterfill, Member of Parliament for Bournemouth, West, whose Bill this is, to the All-Party Building Societies and Financial Mutuals Group across both Houses, of which I was a founder member, and in particular the honourable member for West Bromwich, West, who is an excellent chairman, to Mutuo, which in a sense is the think tank for the mutual movement, and not least to Her Majesty's Treasury team in general and the Financial Secretary in particular.
	My own involvement in matters mutual goes back to my days as the leader of the London Borough of Islington. I think that last century I was its only Conservative leader. I was the director of a co-operative housing association, then, in another place, in the 1980s I took a particular interest in the friendly society movement and was one of the main activists for the Bill in 1992, and the significant changes that were brought about for the friendly society movement. Then later, after serving in that House, I became chairman of the Tunbridge Wells Equitable Friendly Society, now trading as the Children's Mutual.
	Mutuality and the mutual movement are big business in this country. More than 19 million British individuals are members of one or more mutual societies; that is one in three of our population. There are 9,000 industrial and provident societies with assets of £65 billion, 60 building societies with assets of £300 billion, and 57 larger friendly societies with £15 billion of assets.
	The contrast between a mutual company and other companies is how the profits are distributed. Mutuals do not pay any dividends to shareholders, so they are able to operate on much lower margins than Plcs. That means, all other things being equal, they can deliver better value for money to their customers. Every year we see that they do so in the annual tables on financial performance of all life companies and in the tables we see regularly for best-buy across a whole raft of financial instruments. More recently, pressure from building societies was the main factor which prevented banks charging for access to cash machines.
	However, inevitably, markets develop, society changes and, since the companies involved in the mutual movement want to compete, certain changes in legislation are required every now and again. Now is such a time and this Bill addresses three key needs. It is only an enabling Bill, with the detail to be done by regulation. That is not a format I normally like very much, but for these types of problems and opportunities it is a sound format.
	There are four primary clauses in the Bill, two of which deal with building societies and two of which deal with the whole mutual movement. The fifth clause is a title clause. Clauses 1 and 2 concern building societies alone. They arise out of the period in 1986 when building societies were deregulated and when there was concern to protect the financial situation of members. At that time, it was thought correct to set for building societies a maximum gearing level, borrowing against the assets that they had deposited by their members. That level was set at 50 per cent. Over the years, that has worked fairly well. Until now, it has been possible for building societies to operate reasonably adequately within these constraints. However, the time has now come to free them and to change that percentage. This Bill raises the 1986 limits. The level will be dictated by regulation, but it is fairly common knowledge in the trade that we are talking about increasing the level to 75 per cent, which should be more than adequate. As far as I know, every building society is in favour of the change.
	In addition, it is right that this Bill should take cognisance of the Miles review which was set up by the Treasury and concerned the changing nature of the mortgage market. For most of us in your Lordships' House who had mortgages, the mortgage market used to be of a particular nature. That has changed and is changing all the time. It is changing because of the change in house prices and a change in the ability of people to finance. It seemed obvious to a number of us that building societies may now wish to embrace the new fixed-rate policies that have emerged in the current market. We do not believe that it is necessary to continually seek from Her Majesty's Government primary legislation to meet up with any difficulties that may arise. The removal of the constraint—the switch from 50 per cent to 75 per cent—means that the building societies would be in a position to meet whatever changes emerge in the marketplace over the next few years, rather than having to respond to market changes constrained by legislation that might by then appear to be out of date.
	Clause 2 concerns safeguarding the position of building society members, in particular their relationship with the capital markets from which money may be raised. In response to the increased limits that I have described, through the Bill we want to help and give reassurance to the members of the societies so that in the event of a winding up they will rank pari passu with other creditors. The reason for what may seem to be slightly preferential treatment is that people who put money into building societies tend to be relatively small investors, not particularly sophisticated in these markets, and who regard a building society as probably the safest and most convenient place for their money.
	All building societies are covered by the regulations issued by the Financial Services Authority andthe Financial Services Compensation Scheme, so therefore Part 2 is applicable to those regulations and the compensation that arises out of them. It is fair to say, however, that in recent times no building society has collapsed and we certainly do not anticipate any collapses in the future.
	Clause 3 is one of the two clauses dealing with the whole of the mutual movement, in particular outside the building societies. It addresses the transfer of engagement rules. This is a huge opportunity to strengthen the mutual sector. For many years, mutuals in the UK saw themselves as part of a mini-sector, as co-operatives, building societies or friendly societies. More recently, they have become involved in what we would call in toto the mutual sector. Indeed, that was reflected in the other place when the original all-party group on building societies expanded its scope and title to become the All-Party Group on Building Societies and Financial Mutuals.
	It is true that membership overall of the mini-sectors within the mutual movement has declined somewhat. That is partly because of demutualisation and partly because of business consolidation. Consequently, at this point mutuality might be seen as a declining business form, despite its great appeal and its value to consumers and customers. As things stand, it is not possible for one company in one of the mini-sectors to amalgamate with a member of another mini-sector without one of them demutualising, which of course defeats the whole purpose of the exercise. We want to enable those sectors to merge without losing mutuality and thus benefit from the great cross-fertilisation that would come about from such a joining together. That will allow stronger companies to arise, and perhaps by merger they will produce something really interesting in the friendly society/mutual insurance sector or whatever decides to combine. That is the whole purpose of Clause 3. To be frank, in comparison with the rest of the world, the UK environment at the moment is a little restrictive, or at least it does not encourage new corporate options for mutuals. We believe that that needs to be addressed.
	The Bill will give the Treasury a power to make orders to allow different categories of mutuals that want to do so to receive transfers from other categories of mutual society. It will allow the Treasury to treat the transfer of mutuals to other mutuals or their subsidiaries as if they were transfers between the same category of mutual. The only exception from this provision will be the credit unions, where the nature of their business would preclude them from participating in this type of transfer. In overall terms, Clause 3 is probably the most important in the Bill, certainly in terms of what we can do to strengthen the mutual movement as a whole. It will ensure that it is not gobbled up so that the advantages of mutuality and the mutual sector's increasingly competitive edge over the incorporated sector can continue.
	I believe that the Bill will help to empower savers. As I said at the start, we should remember that19 million people are in this sector, which is about a third of the nation. The values that those people have as members and as savers support much that all noble Lords respond to. Saving, in its fundamental sense of investing, of providing for a secure future, is a crucial component to prudence. As such, it encompasses the wise provision of a home and of education and health services, as well as putting aside money for economic resources for investment and research and development. Put simply, savers benefit society because they think and act for the long term. Their values include sustainability, faith in the future and responsibility. I very much hope that your Lordships will give the Bill a fair wind. I commend the Bill to the House.
	Moved, that the Bill be now read a second time.—(Lord Naseby.)

Lord Newby: My Lords, I congratulate the noble Lord, Lord Naseby, on introducing the Bill and for setting out its provisions so clearly. We on these Benches support the Bill and share his view about the value of mutuals.
	As the noble Lord said, the Bill has three principal provisions, the first of which relates to the funding limit. It is a slightly odd provision in that no one seems to be applying great pressure to increase the funding limit in this way, although it is thought that it might be necessary. It is slightly unusual for legislation to anticipate change; it is normally some way behind the curve. Equally, it is slightly odd to have a formulation in these terms. Everyone knows that the plan is that the limit will go up to 75 per cent. Why you cannot put 75 per cent on the face of the Bill and have done with it I am not absolutely sure. But there it is. I am sure the parliamentary draftsmen have very good reasons for it and we will see that that figure is introduced in due course. Equally in due course, it will be interesting to see whether the building societies take up the expanded headroom, as it were, that they have for borrowing.
	The second power giving shareholders greater rights equivalent to other creditors is quite straightforward. Again, it is a provision that anticipates a situation which has not arisen in that no building society has collapsed, if not in living memory, certainly not in recent memory. The provision is welcome and unexceptional.
	I agree with the noble Lord that the third provision about making transfers easier is the most substantial and will be called into use more often. One of the problems I always have in debates in this area is that "mutuals" is a relatively new word in law. We find ourselves sometimes grappling with building societies, sometimes grappling with friendly societies—which is a marvellous phrase—and sometimes grappling with industrial and provident societies. In an ideal world, in this day and age, one would bundle them all together and establish a legislative framework that dealt with them all in a more common way, rather than having a set of separate legislative frameworks for what are essentially similar types of institutions.
	However, we are where we are. The Bill is a step towards making it easier for these bodies, which have the same ethos, to merge and transfer their operations, where that makes best sense, and to work more efficiently.
	I had one mischievous thought in my mind whenI read the week-end papers which stated that responsibility for the control of the financial sector within government may pass from the Treasury to an expanded Department of Trade and Industry. The Bill requires the Treasury to act in this policy area and by the time it has passed it might be that the bird has flown elsewhere. I am sure that will be dealt with by the usual sophistication of the Civil Service. I agree with the noble Lord, Lord Naseby, that in an ideal world the Bill would not give so much power in terms of substance to secondary legislation. Every clause states, "The Treasury shall, by order". As a general principle, I think all noble Lords will agree that is less than ideal. However, given the nature of these provisions, which are non-contentious and technical, we are prepared to accept it. As I said at the start, we are happy to support the Bill.

Baroness Noakes: My Lords, the Bill was introduced by my honourable friend Sir John Butterfill in another place, gained the support of the Government there—a rare accolade—and is now introduced in your Lordships' House by my noble friend Lord Naseby. That makes a proposition so compelling that I need say little more than that the official position of these Benches is to offer 100 per cent support. My noble friend has introduced his Bill with admirable clarity and I have nothing to add to the substance of what he has said.
	I think I shall be a little unpopular with my noble friend because I have a confession: I have always been something of a sceptic about mutuals, because I have never believed that soft ownership structures exert sufficiently strong pressures on management to maximise economic performance. By "soft economic structure" I mean where ownership is widely dispersed and at the same time not associated with financial, economic or commercial skills. Perhaps that is a debate for another day. I should also stress that it is a personal view.
	I completely accept that financial mutuals help to offer greater consumer choice and are a firm part of our diverse and successful financial services industry. Since diversity and choice are a part of effective competition which should in turn deliver value for consumers, they have to be supported. As the party that believes in competition, we welcome measures that maintain the competitiveness of our financial services industry.
	I have two points that I hope the Minister might be able to assist on. I was interested to read the remarks of the Liberal Democrat spokesman in the other place, when he talked of the lack of information about the scale and impact of mutuals in financial services. We know the raw data—my noble friend has outlined the numbers today—but we do not know their market impact or their impact on competition. I rather agree with Mr Vince Cable that there appears to be an important gap in information. The Minister in another place said that he would seek to facilitate that analysis. What is the status of that work?
	The second point also arises out of proceedings in another place. The Bill was rewritten in Committee, effectively by the Treasury, and at that stage insurance mutuals were deliberately excluded because of issues that seemed to derive from European legislation—as of course do most of the problems in the UK. Do the Government intend to bring forward amendments to the Bill to deal with insurance mutuals? That was the impression left at the end of the proceedings in another place. If not, how will those aspects be dealt with, going forward? I am pleased to support my noble friend's Bill.

The Bill was returned from the Commonsagreed to.

The Bill was returned from the Commonsagreed to.
	House adjourned at 6.32 pm.